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On Wednesday, Barclays (LON:BARC) analyst Ross Sandler adjusted the price target for Snap Inc (NYSE:SNAP) stock, lowering it to $15 from the previous $16, while continuing to recommend the stock with an Overweight rating. Currently trading at $9.09, the stock has shown resilience with a 14% gain over the past week, though it remains 39% lower year-over-year. According to InvestingPro analysis, Snap appears undervalued based on its Fair Value calculation. This change comes after Snap reported its recent financial outcomes.
Snap Inc. disclosed revenue and EBITDA figures that slightly exceeded market expectations. The company’s revenue reached $5.53 billion in the last twelve months, with a healthy 15% growth rate. The reported revenue and EBITDA were 1% and roughly $44 million, or approximately 70% higher than the consensus, respectively. However, the company provided no specific guidance for the second quarter, other than noting that revenue is currently experiencing year-over-year growth. InvestingPro subscribers have access to 7 additional key insights about Snap’s financial health and growth prospects, along with comprehensive analysis in the Pro Research Report.
Sandler noted that the challenges faced by Snap were not unexpected, given the current market conditions. Despite these challenges, the company maintains strong liquidity with a current ratio of 4.3, indicating its ability to meet short-term obligations. He suggested that sectors with significant branding exposure to the automotive industry and high direct response exposure to e-commerce affected by tariffs might experience similar trends. According to Sandler, advertising budget cuts often start in the second tier and move up to the first tier within the digital advertising ecosystem.
The analyst also pointed out that Snap’s lower auction density could mean that the company faces more pronounced headwinds compared to larger advertising platforms with more competitive auctions, which typically have over 10 million advertiser accounts.
Despite the reduction in revenue estimates, Barclays believes that Snap is in a stronger position to handle potential downturns than it was in 2022, particularly due to its subscription revenue stream. While Barclays anticipates a challenging period ahead for investors trying to predict Snap’s revenue trajectory through 2025, the firm does not expect as significant a deceleration as seen previously. However, Sandler cautioned that the situation could deteriorate beyond current models.
In other recent news, Snap Inc. announced its first-quarter 2025 earnings, reporting a narrower-than-expected loss with an EPS of -0.08 compared to a forecast of -0.13. The company’s revenue reached $1.36 billion, exceeding expectations of $1.35 billion, marking a 14% increase year-over-year. Despite the positive earnings results, Snap has decided not to provide forward revenue guidance for the second quarter due to macroeconomic uncertainties. Goldman Sachs, BofA Securities, and Evercore ISI have all adjusted their price targets for Snap, with Goldman Sachs lowering it to $8.50, BofA to $10.00, and Evercore ISI to $11.00, while maintaining neutral or in-line ratings. Analysts from these firms noted concerns about user growth saturation, high stock-based compensation expenses, and the impact of changes in advertising dynamics. Snap’s management is focusing on strategic initiatives like augmented reality and direct response advertising to drive future growth. The company is also prioritizing investments in AI and machine learning technologies. These developments reflect the ongoing challenges and opportunities facing Snap in the current economic climate.
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