February seeing turnaround in Meta ad rates, Pinterest users - Piper Sandler
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Meta Platforms (NASDAQ:META) may be seeing a turnaround in its advertising slump, Piper Sandler says in a review of its own digital advertising data.
Declines in Meta's CPMs - advertising lingo for ad rates, a cost charged per thousand impressions - slowed to 9% year-over-year on average in February, the best month for the social-media company since August, analyst Thomas Champion noted. The prior three months had seen declines of 17%, 14% and 25% respectively.
Meanwhile, Meta's Facebook (the core "blue" product) saw 11% drop in CPM, its best results in over a year, he pointed out. And management has again emphasized the trajectory of monetization of its Reels short-video product (a rival to TikTok (BDNCE)).
As for the recently announced second substantial round of layoffs, "We still see room for improvement as Meta's PP&E (property, plant & equipment) per employee is ~50%-plus above peer GOOGL." Overall, he sees the operating expenditures and capital expenditures view as positive, and the ad rates situation as improving.
Champion also says what's on a lot of Meta investors' minds: "Longer-term, we wonder whether a formal assessment of Metaverse spend is under way."
Meta's stock price (META) is up 1.2% Tuesday afternoon.
As for Internet content peer Pinterest (PINS), monthly active user trends seemed positive again in February, and Piper Sandler's first-look impression of first-quarter users suggest 1-2% upside in U.S./Canada and Europe vs. Wall Street consensus. And Pinterest's own CPMs improved sequentially in February, but are still well below the levels they saw in the second half of 2022.
"With PINS, we see 'Many Ways to Win' amidst (1) strong '23 Ad Buyer survey results, (2) improving MAU trends, and (3) margin expansion & capital return," Champion said.
Pinterest stock (PINS) is up 3% Tuesday afternoon.
And as for talk of how the U.S. will deal with Chinese social rival TikTok (BDNCE) and potential national-security implications like a ban or forced divestiture: "If the RESTRICT Act passes, it could result in forced divestiture. In our view, a forced sale would have little impact on our Social names."
Banning TikTok entirely is another matter, he said - resulting in incremental revenue upside of $8.2B for Meta (META), or 6% upside to 2024 estimates; $4.1B for Google (GOOG) (GOOGL), or 1% upside; and $1.7B for Snap (SNAP), representing 31% upside to estimates.
Google has moved higher Tuesday afternoon as well - (GOOG) +3.1%, (GOOGL) +3.2%; Snap (SNAP) is 5.7% higher.