Facebook’s parent company Meta Platforms is set to announce its quarterly results later today. Ahead of the results Credit Suisse has trimmed its target price for the internet giant to $272 per share from $336 earlier. “We decrease our target price from $336 to $272 as we take a more conservative stance on ad revenue growth for 2023 and beyond,” the global brokerage and research firm said. Meta’s stock price has plummeted 46.5% so far this year to now trade at $180.95 per share. Credit Suisse has, however, retained their ‘Outperform’ rating on the scrip.
Credit Suisse said that Meta’s stock performance now hinges on the timeline of reels adoption, closing Reels monetization gap to Feed, the introduction of product development automation to help SMB advertisers; and the length of investments before metaverse opportunities are unlocked. “On the first two, the good news is that we think it could be a matter of months if Stories adoption on IG is any indication given marketers already had 2017-2021 to adjust to vertical ad creatives, and the monetization gap had already been closing,” the note said. However, on the introduction of product development automation to help SMB advertisers; and the length of investments before metaverse opportunities kick in, Credit Suisse believes the timeline will likely be years.
Meta Platforms earnings estimates
Credit Suisse has projected Meta to report revenue of $28,534 million in the January-March quarter, down from $33,671 million in the previous quarter.
Net income is estimated to come down to $6,901 million, as against $10,285 million in the previous quarter.
Diluted Earnings Per Share (EPS) is estimated to come down to $2.46 from $3.67 in the October-December quarter.
Why has Credit Suisse maintained its outperform rating
The brokerage firm said that it has retained the rating on Meta Platform as there is potential for better-than-expected ad revenue growth given ongoing product innovation around all of Meta’s currently-monetized properties. Further, they added that street models are too conservative and underestimate the long-term monetization potential of other billion-user properties like Messenger and WhatsApp. “Optionality for faster-than-expected free cash flow growth as Facebook begins to find greater efficiency in content screening and security,” they added.
Blue sky scenario
While the base case target price has been brought down to $272 per share, CreditCredi Suisse has their blue sky target price for Meta at $398 per share. “Over the last five years, Facebook historically traded in a range of 16x to 41x with an average of 27x and a standard deviation of 5.8x. In terms of upside potential, we apply a 37x multiple to our 2023 GAAP EPS estimate of $10.74 and derive a blue sky scenario of $398,” analysts said. This has been trimmed from $462 earlier.
In the grey sky scenario, a bearish outlook, Meta’s target price has been pinned at $153 per share, down from $173 earlier.