The firm expects advertiser budget cuts early next year will hurt sentiment on the social media stock.
Investors should hold off on Meta as it heads into earnings this week, according to Bank of America. Analyst Justin Post downgraded shares of Meta to neutral from buy, saying there is likely greater ad spending pressure ahead that could hurt Meta's Reels business.
The analyst said that lower content consumption on Snap has made the firm cautious on whether Meta could successfully transition users to Reels. Shares of Meta are already down 61.4% this year as the social media company struggles with near-term pressures. "With total FB/IG y/y time spent was stable to slightly down per SensorTower in 3Q, Reels usage ramp is not proving to be incremental, and time spent is likely down on more valuable social content, in our view.