Meta is facing near-term headwinds to revenue growth, thanks to Americans spending less time on its platforms and to the shift towards still-lower monetizing Reels engagement, Morgan Stanley said Friday. The firm lowered its price target on the Facebook parent to $225 from $280, but kept its overweight rating. The new target implies upside of about 29% from Thursday’s close at $174.66 per share. The total time spent on Facebook and Instagram in the U.S. fell 1% year over year in the second quarter, and 2% year over year in July, with Instagram particularly hit hard, analyst Brian Nowak noted. On top of that, the time spent on Instagram is rapidly shifting toward lower monetizing Reels engagement, he added. “Our base case assumes Meta continues to take a measured approach to the pace at which they ramp Reels ad load…as building/scaling effective ad units that deliver results on new engagement formats (and ad unit pricing in the auction market) can take time,” he wrote. Meta shares have been slammed this year, down 48%, as the company struggles keeping users engaged amid increasing competition from rivals such as TikTok. Changes to Apple’s iOS privacy policy have also hurt Meta. To be sure, Nowak pointed out that Meta is trading at somewhat of a discount. “While Meta faces execution uncertainty, we think it is more than reflected in the price at current levels as our new $225 PT implies paying ~10X our ’23 EBITDA…a ~17% discount to Meta’s long-term average,” he wrote. Nowak also said that the new price target implies a 0.7 times growth-to-profit ratio, which is a 20% discount relative to peers such as Amazon , Alphabet and Netflix . —CNBC’s Michael Bloom contributed reporting.
