Snap, Meta Have More Downside As Competition, Budget Constraints Weigh, Analysts Say

Piper Sandler analyst Thomas Champion saw the digital advertisers might not be done yet with the bad year, Bloomberg reports. The likes of Snap Inc SNAP, Pinterest Inc PINS, and Meta Platforms Inc META have seen both estimates and their stock prices slide this year amid mounting competition and falling corporate ad budgets.

Yet the final cut to forecasts may still be to come. A change to Apple Inc’s AAPL operating system making it difficult for apps to track user activity on iPhones and iPads means the likes of Snap and Meta will continue to lag, the analyst mentioned.

While Alphabet Inc GOOG GOOGL and Amazon.com Inc AMZN should fare better, the group, which also includes Pinterest and Twitter Inc TWTR, might be in for a couple of more quarters of cuts to revenue forecasts “before we’d consider it to be washed out,” Champion said.

Analysts also fear the impact of new entrants as TikTok gains traction and Netflix Inc NFLX and Walt Disney Co DIS launch their ad-supported streaming tiers.

Matthew Kanterman, director of research at Ball Metaverse Research Partners, acknowledged “the perfect storm for digital advertising with Apple’s platform changes, the macro environment, and TikTok’s growth hitting all at once.”

With a recession looming, businesses will be more cautious about spending and opt for the “highest value platforms and not blast out across multiple platforms,” Kanterman said. 

He saw more significant drawdowns for Snap versus Google as quality outperformed the smaller players.

“New mediums could amplify competitive intensity” in the second half of 2022 as many firms compete for ad budgets against “an uncertain backdrop,” Goldman Sachs Group Inc GS analyst Eric Sheridan noted. Amazon has supplanted Microsoft Corp MSFT as the most popular long position.

Photo by Souvik Banerjee from Pixabay