Meta 22Q2 preview: Ad-Pricing pain may persist in the near term

(1) Ad-Impressions Growth May Decelerate to High-Single Digits in 2Q on Competition From TikTok, YouTube, and Increased Time Spent on Reels.

(2) Revenue in 2Q could be flat vs. a year ago as weak ad pricing may have offset ad-impressions growth. Peaking engagement on its apps and a macroeconomic slowdown pose further risks to its 2H outlook.

(3) Meta may face a prolonged fallout from Apple's iOS 14.5 updates, as large exposure to small and midsized businesses means it may take time to recover relevant signals for advertisers on user behavior amid the loss of third-party data.

(4) Ad-Pricing Decline May Persist Due to IDFA Changes, Tougher Year-Ago Comps. Bloomberg believes the pullback in ad spending has been more pronounced in retail and consumer packaged goods, where Meta likely has a higher exposure vs. Alphabet and could face increasing competition as Amazon rapidly expands advertising. The recent target reduction for engineering hires may help pare Reality Labs' losses, but Meta could face a structurally lower gross margin with its pivot to videos.

Credit Suisse decreases the price target from $273 to $245 as it reduces the advertising revenue forecasts for 2H22 and 2023. The FY22 and FY23 adjusted EPS estimates are now $13.74 and $14.24, respectively, versus the prior $14.25 and $15.25.

Bloomberg's consensus estimates for Meta's 2Q22 results are revenue of $28.933billion, -0.4% YoY; adjusted net income of $7.432billion, -28.5% YoY; and adjusted earnings per share of $3.142, -13% YoY.