UBS put the two best-known social media companies in the spotlight, Thursday, with differing views on the outlooks of Twitter (NYSE:TWTR) and Facebook's (NASDAQ:FB) Meta Platforms.
Analyst Lloyd Walmsley assumed coverage of Twitter (TWTR) with a neutral rating, and lowered the price target on the stock to $50 a share from $69. Meanwhile, Walmsley put Meta's (FB) rating at buy, and bumped the shares' price target up to $425 from $416.
Walmsley was upbeat about Meta, calling the company "intergalactically strong" due to growth opportunities from its Facebook Watch and Instagram Reels video services, as well as e-commerce offerings. Walmsley estimated that over the next few years, Reels could contribute as much as $50 billion in sales with e-commerce adding $13.6 billion and Facebook Watch another $2.5 billion.
Additionally, Walmsley said that Meta (FB) "is in a better position to remediate the issues" caused by advertising budgets affected by changes in a recent Apple (NASDAQ:AAPL) iOS update.
"Ad budgets hurt by privacy headwinds have already been cut and are unlikely to get worse," Walmsley said. "As targeting [and] measurement workarounds roll out, [ad] budget [spending] is likely to come back."
Conversely, Walmsley was more reticent about Twitter (TWTR), saying that "heightened expectations around [the company's] 2023 targets that look increasingly like a stretch" will likely continue to weigh on investors' sentiments about Twitter's [TWTR] stock.
Walmsley said that Twitter [TWTR] has implied it will need to add 53 million users a year in both 2022 and 2023 in order to get its target of 315 million users. However, Walmsley estimates that Twitter (TWTR) will add just 2 million users this year and that its goals are likely too ambitious "barring the launch of a highly successful new product."