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In a note on digital ad platforms, Loop Capital analyst Rob Sanderson told investors in a note that they are anticipating muted guidance from companies such as Snap (NYSE:SNAP), Google (NASDAQ:GOOGL), Twitter (NYSE:TWTR), Meta (NASDAQ:META), Pinterest (NYSE:PINS), and Roku (NASDAQ:ROKU).
Valuations for digital ad platforms have corrected meaningfully along with equities across the board, especially growth equities, and the consensus view is that we will be entering a recession, if we’re not already in one, with the first-quarter real GDP declining 1.5% and growth continuing to slow in 2Q, said Sanderson.
“Fears of looming recession were punctuated by Snap’s surprise pre-announcement in late-May. Google, Twitter and Roku have fared better, but social media peers Facebook and Pinterest have declined meaningfully (down 19% and 18% respectively, vs. S&P500 down 5% since the Snap warning – Snap is down 42%),” wrote the analyst.
Loop’s conversations with advertisers, agencies, digital platforms, and channel participants over the past few weeks have so far not uncovered signs of a meaningful pullback in spending.
So far, Sanderson believes macro pressures do not appear to have much impact on advertising spending or changes to outlook.
“Whether we are actually in a recession or simply in an economic slowdown, given the limited visibility, continued supply chain issues and ongoing Ukraine crisis, we expect very muted guidance from the digital companies during the upcoming round of earnings calls and would not be surprised if a few choose not to provide guidance. Either scenario, muted or no guidance, could be a headwind for the stocks.”
The firm cut the price target on Buy-rated Google to $2765, Buy-rated Meta to $180 from $230, and Hold-rated Twitter to $43 from $51.
