UBS Slashes Targets on 4 Social Media Goliaths

Macroeconomic headwinds (inflation, the war in Ukraine, recession fears) are expected to reduce growth in the online advertising business in 2022 and 2023, according to a recent research note from UBS Global Research and Evidence Lab. Excluding China, ad spending growth is forecast to rise 14.3% year over year in 2022 to $431.2 billion and 8.8% year over year in 2023 to $469.15 billion.

Using 2022 as the base case, UBS then estimates the impact of a macroeconomic downturn similar to the 2001 and 2008 recessions. In both cases, ad spending drops sharply in 2023.

The analysts have adjusted their price targets on four of the largest U.S.-based online ad-supported firms, while leaving targets unchanged on two other ad sellers. UBS researchers also noted that emerging market platforms like TikTok could end 2022 with a larger share of the ad market than three of the U.S. firms.


Alphabet Inc.’s (NASDAQ: GOOGL) Google website is expected to account for 42% ($193.9 billion) of the market for online advertising in 2022. Google’s share of the market declines slightly to 44.8% in 2023, before growing to 45.4% in 2024 and 46.9% in 2025.

UBS said that Alphabet is relatively well-position this year “given its skew to performance advertising, insulation from privacy headwinds, a continuing travel ad recovery, and the scaling of Performance Max (PMax).” Performance Max is the company’s goal-based campaign type introduced last year that uses machine learning to serve ads. Risks to 2023 include YouTube revenue and profits, Alphabet’s announced $9.5 billion in U.S. office space and data centers, and more competition from other social media players.

The analysts maintained their Buy rating on Alphabet stock but lowered the price target from $3,600 per share to $2,650.

Meta Platforms

UBS analysts expect Meta Platforms Inc. (NASDAQ: META) to boost ad revenue by just 1.2% year over year in 2022, before jumping by 15% in 2023. Meta’s market share is forecast to drop from 30.5% last year to 27% this year, before rising to 28.5% in 2023.

That said, the analysts go on:

We think Meta has the best risk/reward skew in large cap online advertising right now, despite continued uncertainty around privacy headwinds, TikTok competition and the timing of [R]eels monetization.

Meta’s “macro backdrop is unfavorable,” however, and “broader consumer softness in retail/eCommerce could outweigh near-term positive trends associated with ramping Reels.”

UBS maintained its Buy rating on Meta stock but lowered the $310 price target to $215.

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