Meta’s Earnings Are Wednesday. Wall Street Is Cutting Its Revenue Forecasts

On Wednesday, Meta (META) Platforms, the parent company of Facebook, will release its profits. Analysts are preparing for dissatisfaction.

The social media titan is still battling a less aggressive advertising market, competition from TikTok, and the continuing impacts of Apple's (AAPL) more aggressive approach to safeguarding iPhone users' privacy. In an effort to make its Facebook experience more like TikTok, Meta recently scaled back its employment goals and released a new version of its main Facebook experience.

The stock price of Snap (SNAP) fell by about 40% last week after the firm released poor June quarter data, sending Meta shares down by almost 8% as a foreboding harbinger of things to come. Meta is down roughly 50% for the year.

In a prior forecast, Meta predicted that second-quarter revenues would range between $28 and $30 billion, with a 3 percent headwind resulting from changes in foreign exchange rates. It is possible that the impact of the currency fluctuations will turn out to be far more than what the firm had anticipated, given recent financial results from companies like IBM (IBM), Netflix (NFLX), and others. As the Federal Reserve increased interest rates this year, the value of the dollar rose.

The Wall Street estimate for sales for the June quarter is $29 billion, which is in the center of the expected range. According to Wall Street, sales will total $30.7 billion in the September quarter, $125 billion for the year, and $143 billion in 2023.

Although the majority still suggest the stock of the firm, some experts worry that all of those projections are simply too high.

James Lee, a Mizuho analyst, addressed that precise issue in a research report on Monday. He anticipates $28.5 billion in sales for the June quarter and $29.4 billion for the September quarter. He decreased his projection for 2022 by roughly $6 billion, to $120.7 billion, and down his forecast for 2023 by over $17 billion, to $130.9 billion.

Lee believes that Meta might reduce spending in reaction to the pressure on the top line. The projection for overall costs in 2022 by Meta was reduced last quarter from $90 to $95 billion to a range of $87 to $92 billion, including capital expenditures of $29 to $34 billion.

Lee maintained his Buy rating on the shares but lowered his price objective for Meta shares from $325 to $250. Reduced operational expenditure estimate "may lessen downside risk for the company," even if "we foresee a negative revision cycle," according to analysts.

Buy-side projections for the quarter, according to BofA Global Research analyst Justin Post, are about $28.5 billion in sales, which is less than the analyst consensus. Justin Post maintains a Buy recommendation on Meta shares with a $233 price target. His personal projections are $28.8 billion with earnings of $2.39 per share, which is less than the $2.61 average.

Overall, Post said, "we believe Meta is probably experiencing increased pressure on ad spend since May but is probably holding up slightly better than Snap in Q3 owing to a more established ad platform and larger advertiser base." The BofA analyst believes Meta hasn't done enough to capitalize on important assets, such as Reels, Marketplaces, and Messaging, and he views the current price, which is 14 times expected 2023 earnings per share, to be attractive.

Like his colleagues, Evercore ISI analyst Mark Mahaney is positive about Meta in the long run, but he is concerned about the immediate term due to what he perceives to be excessive projections. In a research report announcing the quarter, Mahaney stated, "We anticipate Meta management's tone being quite cautious" on the forecast for the balance of the year.

He believes that for the stock to increase, Meta must show that it can effectively create and implement an efficient ad attribution methodology that gets over Apple's privacy concerns.

Shares of Meta decreased 1.1 percent on Monday to $167.35.