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Morgan Stanley analysts cut the firm’s price targets on Meta Platforms Inc (NASDAQ:META) and Google parent company Alphabet (NASDAQ:GOOGL) in a note to clients on Tuesday.
They lowered the price target on Meta to $100 from $105 per share and Alphabet to $120 from $125 per share.
The cuts are a result of the firm’s view that there will be lower 2023 macro e-commerce and online ad growth following weaker third-quarter results and still-high uncertainty.
“Signs of a weakening macro ad market continued to grow through 3Q earnings (14 of 19 companies either missing 3Q ad revenue expectations and/or guiding to slower than expected forward growth,” wrote the analysts. “Further, the importance of e-commerce to driving the online ad industry (est 42% of online advertising comes from e-commerce + CPG) combined with our new lower forward AMZN retail revenue growth (following lower than expected guidance) speaks to further risk.”
They added that the earnings come while there is still elevated inflation, with corporate cost pressures on the rise, while Morgan Stanley’s U.S. macro team expects 0.5% real GDP growth in 2023. As a result, it has reduced its 2023 “US online advertising and e-commerce macro estimates by ~5%/4%…now modeling ~6%/5% growth in online advertising and e-commerce.”
However, the analysts acknowledged that the good news is big cap tech seems to be making adjustments to the slowing environment, and they continue to favor Amazon (NASDAQ:AMZN) and Alphabet within the mega-cap complex.
