Meta Faces Rising Risk Of Free-Cash-Flow Burn As Creator Payouts Evolve, Says Analyst
Portfolio Pulse from Shivani Kumaresan
BMO Capital analyst Brian Pitz reiterated a Market Perform rating on Meta Platforms Inc (NASDAQ:META) with a price target of $450. The analyst highlighted the rising risk of free-cash-flow burn due to evolving creator payouts. Meta may need to increase creator payouts to retain engaging content, potentially increasing costs by $3-5 billion annually. The competition from platforms like YouTube, Snap, and TikTok, along with the need to offer revenue share before generating positive FCF, poses additional risks. Despite a rise in revenue from China advertisers, challenges remain with app downloads and user engagement.
June 12, 2024 | 4:58 pm
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BMO Capital analyst Brian Pitz reiterated a Market Perform rating on Meta Platforms Inc (NASDAQ:META) with a price target of $450. The analyst highlighted the rising risk of free-cash-flow burn due to evolving creator payouts. Meta may need to increase creator payouts to retain engaging content, potentially increasing costs by $3-5 billion annually. The competition from platforms like YouTube, Snap, and TikTok, along with the need to offer revenue share before generating positive FCF, poses additional risks. Despite a rise in revenue from China advertisers, challenges remain with app downloads and user engagement.
The analyst's reiteration of a Market Perform rating suggests a neutral outlook. The potential increase in costs due to higher creator payouts and competition from other platforms could offset the positive impact of increased revenue from China advertisers. The challenges with app downloads and user engagement further contribute to a neutral short-term impact.
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