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Barclays, in a research memo on U.S. digital advertising, said on Wednesday that Snap (NYSE:SNAP) is the only name where numbers may be revised up from the depressed levels.
Barclays believes the digital ad market is “soft but stable,” while growth rates will likely continue to decelerate and possibly bottom in 1H23.
“Buy-side expectations appear to be very low for flagship names like Google (NASDAQ:GOOGL) and Meta (NASDAQ:META) based on client conversations, so there may be a little room for better-than-feared results,” wrote analysts there.
“We have been watching trends in Europe, the eye of the macro storm, as a good proxy for the growth-bottoming process, and trends continue to weaken based on our checks. Management teams are reacting to the macro, but we think more needs to be done around headcount reductions and cost cuts coming off the bloat from +2021,” added the analysts.
Several tech firms, including Snap, have confirmed layoffs, with Facebook parent company Meta reportedly announcing a hiring freeze.
“Looking into 4Q, we think digital ads could get a smallish bump from the World Cup and elections, the former could actually distract consumers from the normal e-commerce push on the ‘turkey five’ possibly making the quarter extra promotional, and hence good for digital advertising,” continued the analysts.
“Against this backdrop, we would take another overall cautious stance on upcoming prints and think SNAP is the only name where numbers may be revised up from the depressed levels.”
