By Sam Boughedda
Morgan Stanley cut the price targets of Google parent company Alphabet (NASDAQ:GOOGL) and Facebook parent Meta Platforms (NASDAQ:META) on Monday.
Alphabet's price target was cut to $135 from $145 per share, while Meta's price target was lowered to $205 from $225.
However, Morgan Stanley said the firm are buyers of Alphabet shares on weakness.
"We expect GOOGL to miss consensus revenue and EBIT at 3Q (we are ~3% below street EBIT). But we are buyers on weakness," wrote analysts. "For perspective, GOOGL's long-term trough multiple is 8X EBITDA, so we are watching levels very closely. This should give GOOGL more near-term support, and could provide entry points on volatile weeks...even if '23 estimates have risk."
On Meta Platforms, Morgan Stanley analysts stated that revenue and Opex can drive a higher trading range, but engagement clarity is needed to drive a breakout.
"We are roughly in line with Street 3Q/4Q revenue. On the '23 opex guide, given multi-month headlines and our work about opex discipline and cuts, we are hopeful META will guide to the bottom end of '23 opex to $90bn (8% Y/Y growth)," analysts added. This would be below our current ~$92bn forecast, which does not incorporate discipline and would be important to protecting FCF and regaining shareholder credibility through this challenging micro and macro situation. These dynamics could put a higher floor in META (given its current 6X '23 EBITDA multiple) but in our view META's comments on engagement (is US Instagram time spent growing/healthy, etc) are going to be more important to driving investor confidence in multi-year growth and the multiple."