Meta Platforms Analyst Expects Company To Report Negative Revenue Growth For The First Time

This week is a big one for Facebook and Instagram parent company Meta Platforms Inc (NASDAQ: META). The stock is already down more than 50% so far in 2022, and its second-quarter earnings report expected out on Wednesday could make the difference between a change in trend or the next leg lower.

The Numbers: Unfortunately, Bank of America analyst Justin Post said Monday that the second quarter could also mark a discouraging first for Meta. Post is projecting Meta will report a 1% drop in revenue in the quarter compared to a year ago, which could potentially mark Meta's first ever negative revenue growth as a public company.

Related Link: 8 Snap Analysts React To Q2 Earnings Miss: 'Not Snapping Back Anytime Soon'

Consensus analyst estimates are calling for Meta to report EPS of $2.60 on revenue of $29.1 billion, up less than 1% from the $29.08 billion it reported in the second quarter of 2021. However, Post is predicting Meta will fall short of Wall Street expectations following the disastrous quarterly report from social media competitor Snap Inc (NYSE: SNAP) last week. Post anticipates just $28.8 billion in revenue for Facebook.

In addition to a disappointing second quarter, Post said investors should expect conservative guidance from Meta, including just 3% revenue growth in the third quarter.

Related Link: 8 Netflix Analysts React To Q2 Earnings Beat, Subscriber Guidance, Ad-Supported Tier

How To Play It: Post said it will be tough sailing for all the social media advertising companies in the near-term. In fact, he said an advertising recession may have already begun. Fortunately, he says the company is well-positioned for a rebound in business starting in the second half of the year.

"Driven by user growth, new product offerings such as Reels, and new ad formats, we expect Facebook's ad revenue growth to reaccelerate in 2H'22 and grow closer to 20% in 2023, driving multiple expansion," Post said.

Bank of America has a Buy rating and $233 price target for Meta.

Benzinga's Take: In a matter of just two quarters, Meta's revenue growth could drop from nearly 20% to below zero. Fortunately, the stock is trading at just 12.5 times forward earnings, potentially limiting further valuation downside.

Photo: Courtesy of Anthony Quintano on Flickr