Wall Street Analysts Are Cutting Meta Targets. But They Can’t Keep Up With the Falling Stock.

Investors fled shares of the social-media giant after its fourth-quarter earnings report and outlook showed signs of weakness in its advertising business and its efforts to compete with TikTok.

Champion wrote Tuesday that his conclusion following the firm’s “dismal” first quarter guidance was that the firm was “not bluffing.” He points to commentary from management about operating issues like tough pricing comparisons, headwinds to impressions, and expensive investments in its nascent metaverse endeavors.

He expects challenging comparisons for the firm’s advertising business to continue until August, with slowing daily active user growth, the reopening, and a shift toward its short-form video offering Reels to weigh on impressions. TikTok was referenced six times on the company’s earnings call last month, compared with twice in the third-quarter call and zero times before then in 2021, according to the analyst.

“While this sounds bad—and it is—reality looks mostly priced in,” he writes, noting that shares are trading relatively cheaply at about eight times next-twelve-months estimated earnings before interest, taxes, depreciation, and amortization.

“This is worse than March ’20 (pandemic) and 2Q12 (IPO aftermath),” he writes. “As such, we’re hesitant to be overly negative here.”

Despite the cut, the mean analyst price target is $321.62, according to FactSet. That implies more analysts may need to adjust their expectations unless they continue to believe a 66% turnaround is in the cards.

Write to Connor Smith at [email protected]