By Sam Boughedda
BofA analyst Justin Post lowered the price targets on Alphabet (NASDAQ:GOOGL), Meta Platforms Inc (NASDAQ:META), and Pinterest (NYSE:PINS) on Friday based on lower GDP growth expectations.
In a note focused on online media stocks, the analyst lowered estimates for the stocks, with BofA economists lowering their outlook for US GDP growth and the Fed recently raising interest rates by 75bps, with more hikes likely to weigh on the economy.
"Historical data suggests US online advertising industry growth and US GDP have a high correlation, we expect lower online media spending in 2H’22 and 2023," said Post. "In total, we are lowering our 2023 estimates for Alphabet, Meta and Pinterest (plus our recent estimate cuts on Snap (NYSE:SNAP)) by 8% or $34bn. For now, we have not incorporated a possible recession in our outlook, and have 11% y/y revenue growth expected for the group in 2023.
The analyst cut Alphabet's price target to $2,636 from $2,940 based on lower core services earnings estimates and lower 19x 2023 core services GAAP EPS (vs 20x prior), plus cash. "Our revised multiple reflects lower expected 2023 growth and multiple compression in the broader market and sector," wrote Post, who reiterated a Buy rating on the stock.
Meta's price target was cut to $233 based on lower 2023E GAAP EPS ($12.05 vs 13.68 prior) and unchanged 18x multiple, plus $16 cash, down from $262 (based on 18x 2023E GAAP EPS plus cash). Post also reiterated a Buy rating on the stock.
Meanwhile, for Pinterest, the firm reiterated a Neutral rating on the stock and cut the price target to $31 from $38, based on lower 2023 revenue estimates and an unchanged 7x 2023 EV/Revenue multiple. "We see Pinterest as a high quality platform for advertisers and think users could bottom in 2Q."
Google and Meta remain the firm's top recession stocks.