MoffettNathanson sees more downside risk for media and internet stocks

Investing.com -- A sudden shift in U.S. trade policy has sharply darkened the economic outlook, with MoffettNathanson now warning that sweeping new tariffs could push the country into recession and erase $45 billion in expected ad spending in 2025. Though Trump said authorized a 90-day pause on "reciprocal" and 10% tariffs, effective immediately.

The brokerage said the announcement of 10% tariffs on most remaining imports from 60 countries hit as economic momentum was already slowing, triggering market losses on par with the 2020 COVID crash and 1987’s Black Monday.

If these tariffs remain in place, a U.S. recession appears increasingly likely, analysts wrote, citing risks to both consumer confidence and corporate investment.

The firm had previously taken a “softly pessimistic” view on the economy but is now modeling deeper advertising and earnings pressure across its Media and Internet coverage.

Under a recession scenario where nominal GDP slows to 3% and advertising intensity falls to 1.19% of GDP, total U.S. ad spend could drop by $45 billion, with online ads absorbing the largest hit at $29 billion, followed by TV at $12 billion.

Linear TV, already under secular pressure, risks an accelerated decline akin to what radio and newspapers experienced in past downturns.

MoffettNathanson reiterated Buy ratings on Netflix (NASDAQ: NFLX), Disney (NYSE: DIS), and Warner Bros. Discovery (NASDAQ: WBD), and maintained Neutral stances on Fox, Paramount, and the major ad agencies.

On the Internet side, Alphabet (NASDAQ: GOOGL) and Meta (NASDAQ: META) remain top picks, with Roku (NASDAQ: ROKU), Snap, and The Trade Desk (NASDAQ: TTD) rated Neutral.

We believe NFLX and GOOGL offer relative safety, the analysts said, noting digital leaders are better positioned to weather a downturn.

Still, they cautioned that even after recent valuation resets, Internet names remain vulnerable due to their ad exposure and high multiples.

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