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On Wednesday, Barclays (LON:BARC) analyst Ross Sandler confirmed an Overweight rating on Snap Inc (NYSE:SNAP) with a steady price target of $16.00. According to InvestingPro data, the company, currently valued at $19.46 billion, shows potential upside based on its Fair Value analysis. Sandler highlighted the company’s robust fourth-quarter performance, noting a 14% year-over-year increase in total revenue. This growth was attributed to a strong Direct Response (DR) advertising sector, which also grew by 14% year-over-year, and a significant expansion in Other Revenue, primarily from Snapchat+, which more than doubled its subscriber count to 14 million.
The analyst pointed out that Snap’s international growth showcases the effectiveness of its DR advertising, as brand revenue outside of North America is minimal. The impressive growth rates in Europe and the Rest of the World (ROW), at 20% and 35% respectively, were emphasized as evidence of solid progress. InvestingPro analysis reveals that while the company maintains a FAIR overall financial health score, it hasn’t been profitable over the last twelve months - one of several key insights available in the comprehensive Pro Research Report. Additionally, Sandler observed that every expense line in the company’s earnings saw healthy leverage during the quarter, which led to a 60% incremental EBITDA margin, a 10-point increase from the third quarter.
Stock-based compensation (SBC) also improved, decreasing by 8 points as a percentage of revenue. This figure is now significantly below the historical average, with SBC currently around 17% of revenue compared to 29% in the fiscal year 2023. This improvement in SBC, along with the overall positive performance in the fourth quarter, underlines Snap’s efficient cost management and the potential for continued growth. InvestingPro data shows the stock has gained over 33% in the past six months, with additional ProTips and detailed metrics available for subscribers.
In other recent news, Snap Inc has been the center of various analysts’ evaluations. Morgan Stanley (NYSE:MS) maintained its Equalweight rating on Snap, holding a price target of $10.00, noting the need for more consistent performance despite better than expected Q4 results and Q1 guidance. Wolfe Research also retained a Peer Perform rating, citing concerns such as decelerating growth and subdued user engagement trends. Stifel, on the other hand, held a Hold rating with a price target of $11.00, following mixed Q4 earnings and Q1 revenue guidance.
Bernstein analysts led by Mark Shmulik held a Market Perform rating on Snap, with a price target of $12.00, pointing out the potential impact of a TikTok ban on the social media sector. BMO Capital Markets reaffirmed an Outperform rating with a price target of $16.00, highlighting Snap’s dedication to content creators and advancements in artificial intelligence as key drivers for potential revenue growth. These recent developments reflect a range of perspectives on Snap’s financial prospects.
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