TLDR
- Scotiabank cut META’s price target from $627 to $525 while maintaining Sector Perform rating
- MoffettNathanson warns Trump’s China tariffs could cost Meta up to $7 billion in ad revenue this year
- Meta’s stock has fallen over 35% since Trump’s April 2 tariff announcement
- Chinese retailers like Temu and Shein may reduce ad spending on Meta platforms
- Meta generated $18.35 billion from China in 2024, approximately 11% of total sales
Meta Platforms’ stock has experienced significant pressure in recent weeks as multiple analysts have slashed price targets amid concerns over falling advertising revenue from Chinese retailers. The downward trend comes as Trump administration tariffs threaten to disrupt a key revenue stream for the social media giant.
On Monday, Scotiabank lowered its price target for Meta Platforms to $525 from $627, maintaining its Sector Perform rating. This adjustment reflects growing worries about Meta’s exposure to Chinese advertisers.
Meta’s stock has tumbled more than 35% since April 2, when Trump announced his “Liberation Day” tariffs on Chinese imports. The proposed 145% tariffs and closure of the de minimis loophole have created uncertainty about future advertising spend.
Impact on Revenue Projections
According to MoffettNathanson, Meta could lose up to $7 billion in ad revenue this year due to these tariffs. The research firm has cut its price target by $185 to $525, though it maintains a Buy rating on the stock.
Meta’s 2024 annual report revealed the company made $18.35 billion from China, representing approximately 11% of its total sales. Analysts believe most of this revenue came from Chinese online retailers like Temu and Shein.
These retailers have been heavy advertisers on Facebook and Instagram, targeting American consumers. With new tariffs in place, they may reconsider their U.S. marketing strategies.
In Q4 2024, Meta generated $46.8 billion from advertising, which accounted for 96.7% of its total revenue. This heavy reliance on ad spending makes the company vulnerable to shifts in advertiser behavior.
Broader Economic Concerns
MoffettNathanson warns that if China faces a prolonged economic downturn, Meta’s total losses could grow to $23 billion in 2025. This projection underscores the company’s exposure to international economic conditions.
App store data suggests a sharp decrease in impression share following Temu’s decision to cease advertising activities. This development, along with potential increased import costs due to tariffs, poses risks to Meta’s revenue.
Meta is preparing to release its first-quarter earnings report on April 30. Revenue is expected to reach around $41.7 billion, marking a 14% year-over-year increase.
Truist Securities has reduced its target from $770 to $700 while maintaining a Buy rating. Cantor Fitzgerald lowered its target from $790 to $624, upholding an Overweight rating.
Regulatory Challenges
Adding to Meta’s challenges is an ongoing Federal Trade Commission case. The company has proposed a settlement of approximately $450 million, substantially lower than the $30 billion initially demanded.
Despite expectations that the Trump administration might adopt a more lenient stance toward big tech companies, the FTC has maintained rigorous scrutiny of the industry.
Meta continues to invest in artificial intelligence, which analysts expect will enhance user and advertiser experiences. These investments may help offset some of the revenue challenges the company faces.
The stock currently shows a “GREAT” financial health score of 3.09, with impressive gross profit margins of 81.68%, according to InvestingPro analysis.
Meta is part of the Magnificent Seven stocks, which saw a rise in premarket trading amid hints of a potential pause in auto tariffs. However, the administration continues with plans for tariffs on semiconductors and pharmaceuticals.
Meta’s year-to-date stock decline of 14.28% reflects this combination of factors, including the broader market sell-off and challenging advertising environment.
Wall Street maintains an overall positive outlook on META stock, with a consensus Strong Buy rating among 46 analysts. This rating is based on 42 Buys, three Holds, and one Sell assigned in the last three months.
The average META price target stands at $712.86, suggesting a 42.5% upside from current levels despite the recent downward pressure on the stock.
