Meta Platforms Faces Limited Upside Potential Amid TikTok's Momentum and Revenue Headwinds, Analyst Says

Benchmark analyst Mark Zgutowicz reiterated a Hold rating on Meta Platforms Inc META. META reports its quarterly earnings results on July 26. 

The stock's ~40% appreciation post its 1Q print marked its better competitive positioning (ex TikTok) amid challenging iOS returns and perceived ad market stabilization, coinciding with a flight to big-cap tech. 

Also Read: Meta's Threads Attracts Influencers from Twitter with Welcoming Atmosphere and Creative Freedom: Report

However, the analyst sees limited relative turns against the S&P NTM, given that the flight to big-cap tech (gains) is now rearview. 

Also, industry discussions suggest TikTok's new DR slate is gaining momentum on META's peak DR share position. 

Additionally, the lack of Reels revenue tailwind post revenue parity with Facebook and Instagram exiting FY23E adds to the analyst's concerns. 

Reflecting the above factors plus our NTM macro and consumer spend trepidations (e.g., accelerating credit card/auto loan delinquencies + credit card balances), his 2H23E revenue is -7.0% below consensus. 

And given that most META revenue comes from small businesses, the analyst assumes more significant cyclicality in its results relative to enterprise budget concentrations. 

The analyst's 2QE +7.7% revenue Y/Y is - 1% below consensus, noting 2Q DTC spend on Meta narrowed a bit Y/Y relative to 1Q. 

Net-net, the analyst's FY23E and FY24E revenue relative to consensus is -3% and -8%, respectively. 

Price Action: META shares are trading lower by 1.70% at $289.27 on the last check Monday.