Facebook and Instagram’s parent company Meta Platforms Inc (NASDAQ:FB) and Pinterest Inc (NYSE:PINS) top the pecking order among online advertising companies for analysts at UBS ahead of the kick-off of Big Tech earnings next week.
In a note to clients, the analysts wrote that they believe advertising spend saw some quarter-over-quarter improvement during 2Q with the expectation for further improvement in the second half of 2023.
On Meta, the analysts wrote that, while they see upside to its second half and 2024 revenue and earnings per share (EPS) estimates, the biggest lever for upside was any update on the company’s Generative AI consumer production and how this could impact monetization.
“An early operational expenditures/capital expenditures outlook for 2024 is possible but not our base case,” they wrote. “We see upside potential for 3Q guidance [to be on the] high end versus the Street.”
The analysts have a ‘Buy’ rating and a $335 price target on Meta, above the stock’s current share price of $313.27.
For Pinterest, the analysts expect positive comments from management on the platform’s monetization deals, including Amazon, to improve the outlook for top-line growth later this year and into 2024, but noted that do not expect a meaningful contribution in the third quarter outlook.
“We see in-line revenue in 2Q with potential for high-single-digit revenue outlook but continue to expect Amazon to be a 2024 story for meaningful revenue contribution which could be a near-term disappointment,” they wrote.
The analysts also have a ‘Buy’ rating on Pinterest with a $34 price target. Pinterest shares traded at $29.70 on Wednesday afternoon.
Snap price target raised
Meta and Pinterest are followed by ‘Neutral’ rated Snap Inc (NYSE:SNAP) and Google parent company Alphabet Inc (NASDAQ:GOOG), the analysts wrote.
For Snap, they wrote that they do not expect an inflection to show up in its 2Q revenue or 3Q outlook, as small and medium business success on the platform was not meaningful enough to offset continued disruption from larger advertisers or brand weakness.
"At five times our 2024 revenue estimate, we would rather own Pinterest at a similar valuation with more estimated upside," they wrote.
Regardless, they raised their price target for Snap stock from $10 to $14. Shares traded hands Wednesday afternoon at $13.23.
The price target boost comes from the analysts updating their valuation methodology from an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to revenue multiple, given that recent advertising technology changes and infrastructure investment have pushed out margin scaling making it a less meaningful valuation metric.
The analysts see a beat for Google for the second quarter on better Google Websites revenue combined with slightly better gross margins resulting in EPS of $1.33.
“The key to shares will be 1) commentary on the new search around engagement and monetization impact, and 2) margin outlook,” they wrote.
They have a $132 price target on Alphabet, above the stock's current price of $122.71.
Contact the author at emily.jarvie@proactiveinvestors.com
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