Explore Loop Capital’s revised outlook for Meta Platforms as advertising hurdles impact projections. Discover the latest insights here.
Loop Capital has revised its projections for Meta Platforms (NASDAQ:META), decreasing both its earnings and revenue estimates. The target price has been adjusted from $900 to $695 due to a downturn in Chinese advertising expenditure and a softening U.S. consumer market.
Despite these changes, Loop Capital maintains its ‘Buy’ recommendation. The brokerage highlighted that ad prices are declining as Chinese cross-border advertisers scale back their marketing efforts targeted at U.S. consumers. This reduction stems from the termination of the de minimis exemption and the imposition of tariffs.
According to Loop Capital, Chinese advertisers are projected to contribute around 11% of Meta’s total revenue in 2024, adding 350 basis points to overall growth. However, due to heightened trade barriers, this group might cut ad spending by up to 70-80%.
The exit of major advertisers, such as Temu, has led to a decrease in ad prices. Recent channel checks indicate a drop in CPMs (cost per thousand impressions) on Meta. This dip in demand related to China is expected to cause a 4.5% reduction in ad revenue from the U.S. and Canada.
Beyond international market challenges, shifts in consumer behavior in Meta’s primary markets are also hindering growth. Conversion rates and click-through rates have been decreasing, sparking concerns that performance advertisers may eventually cut back their spending if these trends persist.
Rob Sanderson of Loop Capital commented, “While performance marketers have not yet significantly reduced their budgets, they may be compelled to do so if weak conversion trends continue.”
As a consequence, Loop now anticipates second-quarter revenue guidance to range between $40.5 billion and $43.0 billion, falling below the consensus estimate of $43.9 billion. The brokerage has also lowered its full-year revenue forecast for 2025 by $5.6 billion and its 2026 projection by $7.8 billion.
The updated earnings forecasts reflect a 6% decrease for 2025 and an 8% decrease for 2026. This valuation adjustment is driven by a lower target multiple, indicating increased macroeconomic uncertainty. An earnings per share multiplier of 25x is now applied, down from the previous 30x.
Sanderson further remarked, “We anticipate ongoing investor sentiment and share price volatility as trade tensions evolve.” However, despite these revisions, he believes the long-term investment case remains robust, describing Meta as “one of the best mega-cap stocks for long-term investors to accumulate during periods of market weakness.”
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