Online advertising players face ‘volatile’ season of macro, inflation disaster – KeyBanc (NASDAQ: FB)

Earnings season has arrived for the big names in internet advertising and KeyBanc is expecting another ride through the turbulence through the numbers, this time with new macroeconomic pressures and high inflation putting negative pressure on advertising budgets.

Analyst Justin Patterson revised the model for four companies — but overall, his outlook is lower than Wall Street’s on revenue and EBITDA/earnings per share.

“Our view is that advertisers have diverse vertical exposure, high matching rates in the US, low SMB (small/medium business) concentration, and proven [return on investment] Patterson writes.

That argues for advertising names as diverse as Alphabet (GOOG) (NASDAQ:GOOGLE) and Trading Desk (NASDAQ:TTD), which screens face the most negative fundamental impact, he said.

He is raising estimates for Alphabet’s revenue slightly (to $55.1 billion) and earnings per share (from $22.90 to $24.17 from $22.90). but there is still no consensus on both, about 2%. However, KeyBanc’s revenue outlook is “effectively flat” as headwinds from Europe and YouTube are offset by slightly better forecasts for revenue from high-margin Search. (12.5% ​​growth this year and 13.5% growth in 2023).

However, with some more conservative multiples, it cuts its price target above GOOGLE to $3,075 (implying a 29 percent increase). Alphabet is set to report April 26, with consensus estimates for normalized earnings per share of $25.56 on revenue of $67.8 billion.

Trading desk (TTD). for Q2, Patterson expressed comfort with its current revenue estimates for $305 million and $369 million for Q1 and Q2 respectively.

However, again with downward pressure on the multiple, he is slashing his price target to $90, the cut implies a rise to 51%. Unanimous Expectations for The Trade Desk (TTD) is for normalized earnings per share of $0.14 on revenue of $304.2 million.

The story is not the same for the Meta Platform (NASDAQ:Facebook) or Pinterest (NYSE:PINS), where Patterson expects the e-commerce end product to be a big hit. On Meta, he took a 1% cut to revenue estimates for Q1 and Q2; for this year and next, “we believe that continuation of macro trends (e.g. Europe, Forex) and shift to Reels monetization will affect revenue growth, causing us to decline revenue 4%.”

The downside here is that KeyBanc’s estimates for Meta’s earnings per share are 13% lower than Street’s in 2022 and 12% lower in 2023. The company will report on April 27, with consensus expectations for $2.51 EPS on $28.24 billion in revenue.

Pinterest (PINS) is facing a “tough” first half, and Patterson is slashing estimates there, too. “We believe the combination of positive monthly user trends and consumer spending pressures create downward pressure on revenue growth,” he wrote, noting that the bank is currently 3-4% below street estimates for 2022 and 2023.

On the other hand, “Despite the negative, we believe a change in the pace of monetization and/or cost-cutting initiatives could improve sentiment (stocks are trading near lows). like history on an EV/S basis),” he said. The revenue cut resulted in a price target cut to $36; that still means an 84% increase. Pinterest (PINS) will also report on April 27; The consensus expectation is for earnings per share of $0.04 on revenue of $572.5 million.

MKM Partners entered the online advertising space last week and made its own expectations cut, cited four macro constraints for all companies.