Earnings Outlook: Facebook earnings: Meta’s ‘darkest days’ may be ahead, but some analysts say ad sales still on track

by | Jan 30, 2023 | Stock Market

From all indications, Meta Platforms Inc. appears to be in mega trouble as it prepares to announce fiscal fourth-quarter results on Wednesday. Facebook’s embattled parent company
is awash in more than 11,000 layoffs, a foundering metaverse push, plunging market value, and executive departures amid a digital-advertising decline.

Then there is the threat of TikTok, a favorite among the under-30 crowd that is gobbling up market share at the expense of Meta, Alphabet Inc.’s

Google, Snap Inc.
and Twitter Inc. TikTok’s digital ad revenue is forecast to soar to $36 billion by 2027 from $10 billion in 2022, lifting its share of the global market to 5.4% in 2027 from 2.3% last year, according to Wall Street firm Cowen. Read more: TikTok’s digital ad market share is growing. How will Google and Facebook react? “In 2023, we expect Meta to remain engulfed in arduous battles inside the Octagon. In the long run, we believe Meta will benefit from the secular digital ad trend and innovate in the metaverse; however, regulatory scrutiny persists, internal headwinds remain, and we believe the darkest days of this downturn are ahead of us,” Monness Crespi Hardt analyst Brian White warned in a note Thursday.  And yet appearances can sometimes be deceptive: Several analysts see an upside to Facebook, which remains a powerhouse in the digital-advertising world despite the TikTok menace — Facebook’s ad sales will reach $115.9 billion in 2027 even though its worldwide market share will have dropped to 17.6%, according to Cowen. Indeed, analysts like Mizuho Securities’ James Lee remain positive in their outlooks, based on movement by Facebook users to short-form videos on Reels and improved ad-targeting as the company recovers from privacy changes imposed by rival Apple Inc.
“Our ad checks with leading agencies show” Meta’s revenue “appears on-track, especially based on seasonality analysis that shows a high correlation over the past few quarters,” Lee said in a note to investors on Thursday that maintains a buy rating with a price target of $170. Lee believes Meta’s first-quarter revenue guidance appears to “be intact.” EvercoreISI analyst Mark Mahaney forecasts $30.8 billion in fourth-quarter revenue, shy of Wall Street estimates and down 6% from a year ago. Mahaney foresees 2.96 billion monthly active users, up 2% year-over-year. “We are positive on the Q4 setup given better-than-expected ad checks and lessening [foreign exchange] headwinds should lead to a [reven …

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