Meta Has Improved In Ad Campaigns Over Last Half of March: Bullish Analyst Lauds Efforts

RBC Capital analyst Brad Erickson reiterates Meta Platforms Inc META with an Outperform and a $225 price target.
After analyst checks, he found that META made some meaningful platform changes in data processing & attribution in the second half of March around data processing & attribution, with unexpected ROAS (or return on ad spend) and CPA (or cost per action or conversion) deterioration from the very end of Q1 into early Q2 that he did not detect in earlier checks.
Thus, the analyst got suspicious of prior checks likely capturing a bit more optimism about Q2 indications than what's transpired in the 2+ weeks since in his Friday note titled "Some near-term caution but bigger picture thesis likely remains intact."
While historically, it's not uncommon for META to see some performance volatility late in the quarter (which can be a sign of a good quarter), this disruption seemed a bit more persistent than those found in the past.
Ultimately, he thinks the META platform changes may have just coincided with some transitory consumer weakness following the banking crisis and thus, for a short time, may have caused some of the outsized under-performance he detected.
So while management's comments & guidance may reflect this type of near-term activity, he chose to give META credit for the general improvements it has made over the past six months, in particular with Advantage+ in restoring more of the lost signal, and assume that trajectory generally continues, even inclusive of whatever near-term disruption may have just occurred.
He expects Q1 revenues at the high end of the guidance of $26 billion - $28.5 billion.
For Q2, he expects at least an in-line guide as the Street is modeling Q2 conservatively and below normal seasonality.
Price Action: META shares traded lower by 0.15% at $212.75 on the last check Friday.

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