Twitter, Google and other advertising giants have lowered their target prices! What headwinds do institutions see?

Source: Zhitong Finance

Author: Wei Haoming

MKM Partners trimmed its $Google-A (GOOGL.US) $ target price to $3,300 from $3,375, $Meta Platforms (FB.US) $ 315 from $365, and $Pinterest (PINS. US) $ target price was lowered to $38 from $42, while $Snap Inc (SNAP.US)$ and $Twitter (TWTR.US)$ target prices were unchanged at $47 and $49, respectively. Meanwhile, MKM Partners has a “buy” rating on all companies except Twitter, which has a “neutral” rating.

Online advertising companies, including well-known internet giants such as Alphabet, Meta Platforms, Twitter, Snap and Pinterest, are facing tough macroeconomic conditions, MKM Partners said.

Rohit Kulkarni, analyst at MKM Partners, said: “We believe online advertising companies are facing four increasingly headwinds of macro factors: (1) the direct impact of the Russian-Ukrainian war; (2) the indirect impact and potential spread of the war in Europe; ( 3) slowdown in brand ad spending, especially around geopolitical content; and (4) possible impact of weaker consumer spending in Europe driven by inflation and higher oil prices.”

Kulkarni pointed out that the US domestic advertising market may slow by 1% due to the Russian-Ukrainian conflict, and MKM believes that the European advertising market may be more affected.

Global ad spending will accelerate in 2021 as online advertising reopens and continues to penetrate, the analyst said. But in 2022, ad spending growth should slow, especially in the first half, which is mostly a base effect, and U.S. spending growth should slow to 9-11%. That growth should accelerate in the second half of the year as base effects moderate — the U.S. midterm elections should add about 2% to incremental ad spending, the company said.

Industries expected to increase ad spending this year include technology, telecommunications, media and entertainment, and travel; industries expected to shrink this year include automotive, real estate, and consumer goods.

Therefore, MKM lowered Alphabet’s 2022-2023 revenue forecast by 1% and operating profit forecast by 2%; followed by Meta Platforms’ 2022 and 2023 revenue expectations by 3% and 8%, respectively, earnings per share Expectations are lowered by 6% and 15%, respectively; and Pinterest’s 2022 revenue and EBITDA will be cut by 1%, respectively, and 2023 revenue and EBITDA will be cut by 7% and 8%, respectively.


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