Mizuho analysts see 'growing risks' for Meta Platforms stock

Mizuho analysts warned of potential headwinds for META stock in a note Friday, despite their continued bullish stance.

"The stock has gone from most owned and [a] favored long to funding short [positions] for some HFs [hedge funds]," they note, highlighting a shift in investor sentiment. A lack of near-term catalysts and concerns about future guidance are cited as contributing factors.

Mizuho expresses specific worries regarding potential announcements during the upcoming July earnings call. They anticipate the CEO discussing increased capital expenditures (capex) for AI and metaverse initiatives, which could be poorly received by investors.

"LO [Long-Only] investors remain disappointed on how [the] CEO communicated this acceleration of capex," they explain.

Beyond internal communication concerns, Mizuho identifies potential macroeconomic pressures on Meta (NASDAQ:META)'s core advertising and e-commerce revenue. Additionally, they highlight ongoing worries about weakening ad spend from China due to regulatory issues surrounding US companies like Temu and Shein.

Despite these concerns, Mizuho emphasizes the stock's reasonable valuation, strong annual revenue growth, and continued shareholder returns. "I still love the stock here," conclude the Mizuho analysts, acknowledging the inherent risk-reward proposition for investors.