Meta Platforms, Alphabet slip as Guggenheim cuts PTs on worries over slower growth

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Meta Platforms (NASDAQ:META) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) slipped on Wednesday as investment firm Guggenheim cut earnings estimates and price targets on both companies, citing a "more modest" advertising environment through next year.

Analyst Michael Morris noted that after speaking with industry players, there is some "incremental softness" in advertising demand, though it's unclear at this point just how much there is.

In addition, there are likely to be macro-related headwinds in the second half of the year that result in a pullback in digital ad spend, suggesting that total 2022 spend growth will lag that seen in 2021. It's also expected that ByteDance's (BDNCE) TikTok will continue to take share of the overall digital ad mix, "particularly from the bottom tier of ad budgets," Morris pointed out.

Morris cut the price target on Alphabet (GOOG) (GOOGL) to $2,700 from $3,000, noting it is trading at a 15% discount to the current multiple of Microsoft. The analyst expects the tech giant to be a resilient player in the advertising space, given its diverse inventory and broad base of advertisers, but added that YouTube ad revenue growth should be "materially slower" than in the past.

The analyst lowered the price target on Meta Platforms (META) to $205 from $250, citing a lower market multiple for the Nasdaq 100.

"We believe investors will debate incremental usage and advertiser and regulatory headwinds vs. the company’s unique consumer scale, leading advertising platform, and financial and technological resource advantages," Morris wrote, adding that shares are now "attractively priced."

Morris also noted that Pinterest (PINS) and other "less-scaled digital advertising platforms" are likely to be at greater risk if ad spend should come down, but the analyst left the firm's $22 price target on the stock unchanged.

On Tuesday, investment firm Barclays cut the respective price targets on Alphabet (GOOG) (GOOGL), Meta Platforms (META), Pinterest (PINS) and Snap (SNAP), citing a "perfect storm" in digital advertising amid increased competition and structural headwinds.

Comments

[MR. TRANQUILITTI]

And to think Michael Burry bought Alphabet at around $2700 pre Nasdaq selloff............

[karondongotbanned]

i was wrong about goog. regret not buying it at 2200... now its too late.

[jravens1313]

@karondongotbanned Volatile times will continue. But whats 4% in the grand scheme of things?

[zito]

Certainly ad spending will decline with a slower economy, but will the reduction be in digital or conventional?

[MR. TRANQUILITTI]

The average price target is over $3000.

Alphabet has an additional $70B buyback in play.

[jravens1313]

@MR. TRANQUILITTI PTs are BS. But I would gladly hold GOOGL at 3k if it stood there today.

[grharbart201]

If the big techs weren't buying back stocks by the billions do you even think where there stock prices would be?

[MR. TRANQUILITTI]

@grharbart201 That goes the same for all stocks including Berkshire Hathaway - Buffett has been buying back billions.

[jravens1313]

@grharbart201 I like buybacks, but prefer when they time them better. I think a payout ratio of 15% buybacks & 15% dividends is the ideal shareholder return. Still plenty left over to reinvest in future growth.

[MR. TRANQUILITTI]

The average price target is over $3000.

Interesting, Michael Burry bought Alphabet at around $2700 pre Nasdaq selloff.

It's his fourth largest holding and he bought Meta too and it's his sixth largest holding.

He liquidated his holdings to only 8 positions.

[jravens1313]

@MR. TRANQUILITTI Do you know how many he had before he liquidated the others? I'm a huge fan of portfolio concentration of your top 3-5 names. But will spread the other 50% out across a lot of co's i believe in, with a few specs.

[MR. TRANQUILITTI]

@jravens1313 He had none it was a new position.

[jravens1313]

@MR. TRANQUILITTI you mentioned he liquidated other holdings. Does he normally have high concentration and only 8-10? Or did Burry reduce this number from lets say 20 stocks?

[EverydayJoeSchmo]

But yesterday…

[coolcatnip]

oh yes...worries, OMG what are going to do?...I'm worried, we're worried, nothing but worries in front of us , I sure hope we can make through the worries...what if , what could happen, what might happen...oh so many worries, I think I'll have a slice of cold pizza!

[Oil Can]

Not really seeing any $GOOGL "slippage" today.

Seeking Alpha listening to every Tom, Dick, and Harry...

[User 56360468]

Google, Facebook and Apple aren't just in a downturn but the tail-end of the smartphone era that made them big. The smartphone is evolving from a high margin high demand flagship-centered market into a commoditized low margin appliance. It used to be considered a status symbol for a lot more people than it is today. Now, only a relative handful actually care what kind of phone brand they have, as long as its capable of making calls. As the smartphone declines in importance, so will its services and apps. People will do their web browsing on their home PCs, now that many more work from home or bought PCs to play videogames on in the pandemic, thanks to Microsoft and Sony failing to keep up with console demand.

Facebook erred in trying to mediate the online debate, and made both sides mad by enforcing their internal rules of decorum on the rest of the world. People just using their smartphone as a phone aren't as likely to flip through Facebook on a web browser. It's a mobile app first and foremost.

www.androidpolice.com/...

A Google-backed company is about to plaster ads on your lock screen through your carrier. The final cheapening of the smartphone experience will be the straw that broke the camel's back for any phone costing over $200. People will have to think a lot harder about locking themselves in to 2 year contracts for the subsidized carrier-locked phone flashing ads on their lockscreen.

I'm sure Apple will pick up some disgruntled Android customers as a result of this, so maybe they won't do as poorly as the Android phone makers and telcos will. These companies have made a lot of unforced errors. A fool and his money were lucky just to get together in the first place.

[Blowback2]

@Found.Alpha ‘Now, only a relative handful actually care what kind of phone brand they have, as long as its capable of making calls.’ Good thing Apple and its customers didn’t get this email.

[User 56360468]

@Blowback2 Yes they did. Apple's year over year quarterly profit growth has declined every quarter since March 2021

[jravens1313]

@Found.Alpha Not true at all. Smartphones literally dominate screen time and human behavior. People are still paying $800+ for the latest smartphones. And most carriers have reduced how much they subsidize. That could change during tough times, but the phone usage will not.

[Hudson Investments]

The price targets are still favorable for the current investor despite a slowdown in ad spend.

[OverTheHorizon]

“Estimates” still 30% too high. Also 30% too many “analysts” on the planet.

[Publius Valerius]

Good - earnings targets need to come down in order for the healing to begin. This is the bottoming process.

I expect some sideways trading and several bear rallies over the next 3-6 months, but then the next leg up……

[Chet Manly]

Slowdown, yep, I’m predicting GOOGL will be $110 by month end.

[Cristi_an]

i wish i see the day these analysts are sued to the ground for the damage they make

[Dr.Div63]

@Cristi_an no one is forcing you , nor anyone else to listen .

[A Belgian Value Investor]

"Morris cut the price target on Alphabet (GOOG) (GOOGL) to $2,700 from $3,000, noting it is trading at a 15% discount to the current multiple of Microsoft."

P/E of 27x vs 20.4x
EV/EBITDA of 19.3x vs 11.2x
FCF/EV of 3.5% vs 5.5%

🤔

[dgi123]

What a joke lowering the price target of Meta to $205 "citing a lower market multiple for the Nasdaq 100". Meta already trades at such a low multiple that it's been placed in the value funds seekingalpha.com/...

Eps is down this year but expected to resume 15-20% annual growth for the next 5 years at least

[MR. TRANQUILITTI]

Interesting, Michael Burry bought Alphabet at around $2700 pre Nasdaq selloff.

It's his fourth largest holding and he bought Meta too and it's his sixth largest holding.

He liquidated his holdings to only 8 positions.

[A Belgian Value Investor]

@MR. TRANQUILITTI But his short on Apple equaled his investment in Alphabet and Meta so it could be a hedge.

[MR. TRANQUILITTI]

@A Belgian Value Investor He is Long Alphabet and Meta so no matter his strategy he wants them to go up.

[longmoneyvinz]

analysts are lagging the timing.

[bketz]

@quaresma7 that is always how it works