JPMorgan analyst Douglas Anmuth cut his rating to Neutral from Buy for the first time since the social media giant’s IPO in 2012.
“FB is seeing a significant slowdown in advertising growth while embarking on an expensive, uncertain, multi-year transition to the Metaverse,” wrote Anmuth and his team in a note to investors.
Meta highlighted it faces a roughly $10 billion headwind to adverting because of Apple’s privacy IOS changes, which make it more difficult for advertisers to accurately target users.
CEO Mark Zuckerberg acknowledged the competition from TikTok several times during the earnings call.
“Theories abound as to why FB called out TikTok competitive dynamics several times on the call while hardly acknowledging it publicly as a competitor over the past few years,” wrote Anmuth.
Later in the note he added, “It’s unclear whether FB’s about-face on TikTok is for the benefit of regulators or in the interest of transparency, but the comments were notable to investors.”
The analyst lowered his price target from $385 to $284.
“For now, we move to the sidelines as we believe shares will be under further pressure or range-bound in coming months,” wrote Anmuth.
BMO analyst Daniel Salmon downgraded Meta to Market Perform from Outperform, slashing his price target to $290 from $323.
“While Commerce remains a huge opportunity, it seems less likely to drive multiple expansion as new competitive elements likely overwhelm the narrative. Finally, the outlook for consolidated company margins remains challenging in light of aggressive investing in the Metaverse,” wrote Salmon in a note to investors.
The downgrade comes a little more than a year since the stock was upgraded at BMO to Outperform in January of 2021.
Meta’s quarterly results also prompted Loop Capital analyst Alan Gould to downgrade the stock from Buy to Neutral, with a price target cut to $230 from $380. Mirae Asset Securities’ Yongjei Jeong changed his recommendation on the stock from Buy to Trading Buy, with a price target slash from $403 to $356.
Out of all the analysts ratings tracked by Bloomberg data, the stock has 49 Buy, 11 Hold, and 2 Sell recommendations. The average price target is $340 per share.
Meta’s stock got crushed on Thursday, on pace for its biggest daily decline in the company’s history.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre