By Angela Palumbo

Tech stocks rallied following news of some temporary tariff exemptions for electronics, but the long-term economic impact from a trade war could hit tech in another way -- a slowdown in ad spending. This analyst thinks Meta can weather that storm better than its peers.

The Nasdaq Composite has dropped 13% this year as tech investors take a more risk-off approach amid the consistently changing headlines around tariffs. But the index rose on Monday as investors, who were previously nervous that consumer electronic companies like Apple would be hit hard by tariff-induced rising prices, breathed a sigh of relief following news of a temporary tariff exemption for consumer electronics.

Still, " Citi economists continue to expect a significant slowdown in growth and rise in inflation despite the 90-day pause on reciprocal tariffs which we believe is likely to impact eCommerce and online advertising budgets," Citi analyst Ronald Josey wrote in a note.

Tariffs don't just have a direct impact on tech companies through higher prices for goods. The overall economic environment can weaken if a trade war leads to a recession and consumers pull back. That could then lead to advertisers cutting their spending.

Meta Platforms makes most of its revenue from advertisements. Despite the risk to revenue growth if ad spend slows, Josey said that Meta remains his top internet pick. He believes that Meta's family of apps, including Instagram and Facebook, would be among some of the last platforms to experience a slowdown in ad spending because of the massive amounts of users they get on a daily basis, leading to high ad engagement.

Josey lowered his price target on Meta to $655 from $780. He also lowered his price targets for other tech stocks, including Amazon.com to $225 from $273, Reddit to $150 from $220, Pinterest to $38 from $47, and Snap to $9 from $13.50.

"Following rising (145%) tariffs on China and 10% baseline tariffs on other countries, weakening consumer sentiment, and more limited macro visibility, we are lowering our projections and TPs [price targets] across our core Online Advertising and eCommerce coverage," he wrote.

Meta stock was down 1.7% to $522.16 while the S&P 500 was off 0.1% on Tuesday.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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April 15, 2025 14:10 ET (18:10 GMT)

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