Investing.com -- Loop Capital lowered its earnings and revenue estimates for Meta Platforms (NASDAQ: META ) and cut its price target to $695 from $900, highlighting risks tied to reduced Chinese ad spending and signs of U.S. consumer weakness.
While maintaining its Buy rating, the brokerage warned that “ad pricing has been falling as Chinese cross-border advertisers cut back on marketing to U.S. consumers amidst closing of the de minimus exemption and tariffs.”
Chinese advertisers accounted for about 11% of Meta’s total revenue in 2024, contributing 350 basis points to overall growth. Loop believes this cohort may reduce ad spending by 70–80% due to escalating trade barriers.
The retreat of large spenders, such as Temu, has already driven lower ad prices, with channel checks showing falling CPMs on Meta in recent weeks. The firm assumes a 4.5% ad revenue headwind in the U.S. and Canada from this drop in China-linked demand.
Alongside international exposure, consumer behavior trends in Meta’s core markets are also pressuring growth.
Conversion rates and click-throughs are declining, raising concerns that performance advertisers may begin to scale back if these trends persist.
“Performance marketers do not appear to have meaningfully pulled back yet but will eventually be forced to if weak conversion trends continue,” Loop Capital’s Rob Sanderson said in a note.
As a result, Loop now expects second-quarter revenue guidance in the $40.5 billion to $43.0 billion range, below the $43.9 billion consensus.
The brokerage also reduced its full-year 2025 revenue forecast by $5.6 billion and cut its 2026 projection by $7.8 billion.
The revised earnings estimates reflect a 6% reduction for 2025 and 8% for 2026.
The valuation reset is also driven by a lowered target multiple—25x EPS versus 30x previously, reflecting increased macro uncertainty.
“We expect investor sentiment and stock price volatility to continue as trade tensions evolve,” Sanderson added.
But despite the revisions, he sees the long-term investment case as intact, calling Meta “among the best mega-cap stocks for longer-term investors to accumulate on weakness.”