Meta stock downgraded at Bank of America amid concerns about Reels and the metaverse - MarketWatch

“So far, Reels content does not appear to be materially incremental for total time spent connected Instagram (IG) and Facebook (FB) and, similar Snap, societal contented clip successful stories and provender could beryllium down high-single digits,” Post wrote. “The shift successful usage connected FB/IG is simply a imaginable antagonistic for gross margins and agelong term-competition.”

Reels are Meta’s mentation of what TikTok shows its viewers, but they presently don’t bring the aforesaid level of monetization for Meta arsenic much established contented types.

Meta shares are disconnected astir 1% successful premarket trading.

Post sees “added hazard of more negative sentiment into 2023 connected cautious ad checks,” and helium notes that Meta “could be less apt to keep up with peers connected eventual marketplace recovery on concern exemplary shifts (Reels and Metaverse).”

The institution changed its sanction to Meta a twelvemonth ago arsenic it made a larger stake connected opportunities successful the metaverse, oregon virtual worlds wherever radical tin connect. But the company’s increasing accent connected the metaverse has been arguable fixed the clip it could instrumentality for Meta’s lofty efforts to manifest into existent results.

Meta shares person stumbled this year, falling 61% arsenic the S&P 500 has mislaid 21%.

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Post holds the presumption that “Metaverse concern volition stay a banal overhang” for the company. Additionally, helium wrote that Wall Street “is little apt to backmost retired Metaverse spend from EPS [earnings per share] for valuation purposes fixed deficiency of evident advancement with (or reported metrics on) users, imaginable caller Apple competition, and a higher cost-of-capital mindset.”

Meta is owed to study third-quarter results Wednesday afternoon, and portion Post expects the institution could present an in-line performance, helium sees the imaginable for “uncertainty” erstwhile it comes to Meta’s outlook. A Bloomberg News study indicated precocious that Chief Executive Mark Zuckerberg shared internally his anticipation that Meta could go a “somewhat smaller” organization by the extremity of adjacent year.

“While comments were likely geared toward addressing ongoing headcount reductions, we deliberation commentary suggests a perchance cautious outlook connected guardant revenues,” helium wrote.

He chopped his terms nonsubjective connected Meta’s banal to $150 from $196.