Google, Facebook Parent See Price Target Cut Just Ahead Of Q3 Results: Key Factors This Analyst Is Watching

Zinger Key Points
  • Tough ad environment is expected to have an impact on Q3 results of Meta and Alphabet, says KeyBanc
  • Cost containment initiatives should help when recovery materializes in 2024, the firm says.

As Meta Platforms Inc. META and Alphabet Inc. GOOGL GOOG prepare to release their third-quarter results, an analyst at KeyBanc Capital Markets took down his estimates — both current year and forward — as well as price targets for shares.

What Happened: Justin Patterson maintained his Overweight ratings for the shares of both Meta and Alphabet. He reduced the price target for Meta from $196 to $175 and that of Alphabet from $125 to $120.

See Also: Why Big Tech Earnings, October CPI Print Could Be Near-Term Market Drivers: Gene Munster On These 2 Catalysts

4 Things KeyBanc’s Watching: Across both the earnings prints, the analyst said he would be watching macro and vertical health, TikTok rivalry, regulatory landscape and capital allocation and expense discipline.

On the regulatory front, Europe’s forthcoming passage of the “Digital Markets Act” suggests increased operating costs for these companies in 2023 and beyond, Patterson said.

Alphabet Faces Slowdown Across Core Products: Citing decelerations across Alphabet’s core products, Patterson reduced the third-quarter revenue and earnings per share estimates by 1% and 3%, respectively, to $57.2 billion and $1.15. The analyst expects a six-point deceleration for Search and flat revenue for YouTube year-over-year due to macro and forex headwinds. Patterson also lowered his 2023 and 2024 estimates, citing softer ad and enterprise IT market.

Forex To Hurt Meta:  KeyBanc lowered Meta’s revenue estimate by 2% to $27.8 billion, reflecting ongoing forex headwinds. The firm also reduced its 2023 and 2024 estimates for the social media giant.

Meta Positioned Better Long-Term: Patterson said he sees more potential upside for Meta in the long-term, given subdued sentiment toward metaverse investments.

“While we anticipate flattish-to-LSD EPS growth at both companies, we believe progress with cost containment initiatives could reassure investors that 10%+ revenue growth and high-teens to 20%+ EPS growth is attainable in a 2024 recovery,” Patterson said.

Price Action: Meta closed Monday’s session down 0.22% at $129.72 and Alphabet ended at $102.52, up 1.37%, according to Benzinga Pro data.

Read Next: How To Invest In The Metaverse

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: Analyst ColorEarningsNewsSocial MediaPrice TargetReiterationAnalyst RatingsTechGeneralJustin PattersonKeyBanc Capital Markets
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!