Investors brace for Meta earnings as rival reports show more ad slowdown
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Meta Platforms (NASDAQ:META) is set to report its third-quarter earnings after the closing bell Wednesday - and as with other quarters this year, key lead-in reports from rivals are pushing investors to lower expectations for the online advertising market.
Snap stock (SNAP) tumbled 28% Friday after it logged the worst revenue growth rate in its history despite encouraging user growth.
And Tuesday afternoon, Alphabet (GOOG) (GOOGL) stock fell after the company missed revenue forecasts as declines in YouTube and Google Network were a drag on resilient Search revenues.
That points to a corresponding slowdown in Meta's ad revenues, which would decelerate for the second quarter in a row. Analyst consensus is for third-quarter revenues of $27.4B (a 5.5% decline from the prior-year Q3), and adjusted earnings per share of $1.85 (down a full 43% year-over-year).
Meanwhile, those forecasts have seen nearly nothing but cutbacks. In the past three months, revenue expectations have been revised downward 46 times, vs. zero upward revisions; and EPS forecasts have been revised down 38 times, vs. just one increase.
BofA analyst Justin Post gave Meta a fresh downgrade Monday, cutting the stock to Neutral from Buy, citing in part the weakness seen in Snap's revenues.
Even with lower expectations for Q4 and 2023, he expects "advertiser budget cuts in early 2023 to weigh on sentiment and drive added uncertainty on post-IDFA changes and Reels transition."
And Altimeter Capital's Brad Gerstner penned an open letter to Meta CEO Mark Zuckerberg and his board Monday, urging cuts to headcount of at least 20%, cutting annual capital expenditures by at least 16%, and pulling back metaverse investment to just $5B per year at most.
There's still time to weigh in on Seeking Alpha's Weekend Bite poll: Which Big Tech stock do you like best for 2023 (AAPL, GOOGL, META, MSFT)?