Snap's Earnings Miss Is Not Facebook's Gain: Why This Analyst Cut Stock Price Target, Earnings Outlook

Snap Inc (NYSE:SNAP) shares plunged 23.2% on Friday morning following a disastrous third-quarter earnings report on Thursday afternoon and other social media stocks traded lower in sympathy.

One of Friday’s big losers was Facebook, Inc. (NASDAQ:FB), and at least one Wall Street analyst slashed his Facebook price target in response to the Snap earnings miss.

The Analyst: Bank of America analyst Justin Post reiterated his Buy rating for Facebook but cut his price target from $425 to $385.

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The Thesis: In the new note, Post said Snap’s commentary and guidance suggest supply chain pressures on direct response (DR) ad spending in the near term.

“We now expect a 7-8% impact in 3Q and the impact to grow in 4Q for FB, though we think Facebook’s broader advertiser base, which includes large brand advertisers, should help offset this,” Post said.

Post has also cut his 2021 and 2022 Facebook revenue estimates from $120.4 billion and $142.7 billion to $117.9 billion and $136.3 billion, respectively. He also reduces his 2021 and 2021 EPS estimates from $17.59 and $19.79 to $17.19 and $18.09.

Post said Facebook will face elevated risk in the fourth quarter given difficult usage comps compared to a year ago. In addition, he said Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) and Twitter Inc (NYSE:TWTR) are better-positioned to manage Identifier for Advertisers (IDFA) headwinds.

In the longer term, Post said he sees value in Facebook shares given the company’s large base of advertisers and its proven track record of ad measurement innovation.

Benzinga’s Take: Facebook shares are down 5.50% on Friday at publication and 8.9% overall in the past month, suggesting the bar of expectations for Monday’s earnings report has been lowered significantly.

In the past several years, Facebook has overcome a seemingly never-ending parade of headwinds and controversies, so investors remain confident the latest ad pressures are merely a bump in the road.

Image by Simon from Pixabay