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KeyBanc analysts lowered price targets on Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) amid increasing concerns the ad market will see a downturn in 2023.
These concerns have made investors further skeptical of revenue estimates for both META and GOOGL, analysts said in a client note. As a result, the analysts cut price targets to $120 for GOOGL and $175 for META, down from the prior $125 and $196, respectively.
The lowered price targets reflect decreased Q3 revenue/EPS estimates by 1-3% for Alphabet, as well as lowered Q3 revenue estimates by 2% for Facebook-owner. The 2023/2024 estimates are also slashed.
“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,” analysts wrote.
The lower-than-expected revenue growth for 2023 is now shifting investor focus to capital allocation and expense discipline, analysts added. They see more upside in META shares “given subdued sentiment around metaverse investments.”
META shares were downgraded to Neutral at BofA yesterday on belief the ad spending pressure is likely to increase from here.
