HSBC downgrades Meta rating to Downgraded
2023.02.03 10:41
HSBC downgrades Meta rating to Downgraded
By Ray Johnson
Budrigannews.com – Meta Platforms (NASDAQ🙂 was downgraded by HSBC Global Research. following the social media company’s fourth-quarter results, to a Reduce rating (from Hold) and a price target of $110.00. Meta’s fourth-quarter earnings were $1.76, below the consensus estimate of $2.20.
Users increased and engagement increased, but revenue decreased by 4.5 percent and a significant restructuring charge of $4.2 billion were only partially offset by lower depreciation. Meta’s revenue will begin to decline for the first time in 2022.
In Q4 22, Facebook’s daily users increased by 3.7% year-over-year to 2 billion, in line with the previous nine months’ growth; In addition, monthly users have increased by 1.8%, and the engagement rate, which now stands at 67.5 percent, is higher than it was a year ago (66.2%).
“Meta’s addressable market (global advertising spend) is highly correlated with GDP growth,” analysts wrote in a note. Growth forecasts have been under pressure in recent quarters due to a variety of factors. Low consumer demand, high interest rates brought on by inflationary pressures, and global geopolitical tension are just a few examples.
We estimate that Meta’s weighted footprint will expand at a slower rate than the global economy in 2023 and 2024 based on the opinions of HSBC economists. For the upcoming years, we anticipate Meta’s market share, which is roughly 98% of its revenues from ad placements on its platforms, to remain fairly stable at around 19%.
Meta management has stated that 2023 will be a “year of efficiency,” and it has extended the buy-back authorization to $40 billion after achieving $6.9 billion in 2022 and reduced its total spend guidance for 2023 by $5 billion ($4 billion adjusted for restructuring).
Labor cost restructuring was $975 million, with the 11k laid off employees expected to leave the company in Q1 2023. Meta has already booked restructuring charges of $4.2 billion in the fourth quarter, consisting of $1.9 billion in costs related to facilities consolidation and data center rationalization for $1.34 billion.
Meta anticipates additional restructuring costs of $1 billion in 2023, but the company warns that it “may incur additional restructuring charges as we progress further in our efficiency efforts.” On Friday, META shares were up 23.28 percent in pre-market trading.
