Google and Facebook stocks take a hit after analysts cut outlook on internet advertising
Shares of Google’s parent company Alphabet Inc. and Facebook Inc. were hit hard on Tuesday, as part of a large tech industry liquidation, after Wall Street analysts lowered their price targets and put warning of a new weakness in online advertising sales.
fell 3.9% in midday trading and Facebook FB shares,
lost 4.2%, to overtake the SPX of the S&P 500 index,
decrease of 3.0%.
Raymond James analyst Aaron Kessler cut his stock price target for Alphabet by nearly 10% to $ 1,425 and for Facebook by 20% to $ 215.
Kessler also cut his 2020 revenue estimates by 14% for Alphabet and 15% for Facebook, citing weakness in digital advertising as the COVID-19 pandemic negatively impacted consumer spending. It lowered its 2021 forecast for Alphabet by 10% and for Facebook by 12%.
Do not miss: Facebook Has Record Usage, But Will Advertisers Spend As Coronavirus Spreads?
Read also: Google has braved the recession, and Alphabet is more diverse as the coronavirus shakes its rivals.
While some data suggests the worst may have passed in March, the improvement in April was very category specific as e-commerce boomed, but restaurant data remains weak and travel has been strong. effectively interrupted.
“We are also waiting [small- and medium-size] corporate spending will remain low in the near term, which we believe will have more negative impacts on Google and Facebook, ”Kessler wrote in a note to clients.
Deutsche Bank’s Lloyd Walmsley also slashed his price targets as he expects online advertising trends to be weaker at the end of the first quarter, then to fall to a low in the second quarter before starting. an “uncertain recovery” extended into the third quarter, which lasts until 2021. Its price target for Alphabet falls 11% to $ 1,515 and for Facebook 29% to $ 200.
Walmsley also lowered his target for Twitter Inc.’s TWTR stock,
by 37%, to $ 22. The stock, which fell 6.0% at midday, was still 15% above its price target.
He now expects internet advertising on major public platforms to drop 16% in the second quarter and 2% for the year, although his conviction is low given the uncertainties surrounding the economic outlook. Yet despite recent weakness, stocks are still far from cheap.
“The valuation appears to be stretching across the gap on our new numbers (similar to the market as a whole), making us less excited about the 12-month hike from here,” Walmsley wrote.
The massive sell-off of the internet leaders comes as the tech industry suffered another blow on Tuesday.
To put the weakness of the sector in perspective, despite the historic crash in oil prices, the listed fund SPDR Technology Select Sector XLK,
fell 4.3% on the day and 5.8% in the last two days, while the SPDR Energy Select Sector ETF XLE,
fell 2.1% Tuesday and 5.2% this week. Meanwhile, continuous crude oil futures CL00,
fell 45%. See Term movers.
Read also: Opinion: Explaining the plunge in the oil market: Oil has become more of a problem than it is worth.
And the highly technical Nasdaq-100 NDX,
, in which technology has a weighting of 55.4%, fell 3.8%, with only one component gaining ground.