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On Monday, Benchmark reiterated its Hold rating on shares of Snap Inc (NYSE: NYSE:SNAP), highlighting the significant overhaul of the company’s direct response (DR) advertising technology. According to InvestingPro data, Snap, currently valued at $14.92 billion, has seen its stock decline by over 23% year-to-date, though analysts expect the company to return to profitability this year. The analyst from Benchmark pointed out that the revamped ad tech stack, which now accounts for 75% of Snap’s revenue, has shown improvements in several key areas. These improvements include the launch of pixel purchase optimization in late 2023, which is now demonstrating competitive Return on Ad Spend (ROAS).
The analyst also noted the consolidation of Snap’s unified app-based models, reducing them from 20 to a smaller, more efficient set. This change is designed to streamline the company’s ad delivery process. Additionally, the implementation of target cost optimization (TCPA) is helping advertisers better manage their costs per action, a key metric for marketing efficiency. These efficiency improvements come as Snap maintains a healthy gross profit margin of 54.09% and operates with moderate debt levels.
Another area of advancement for Snap’s advertising technology is the development of more sophisticated targeting capabilities. These improvements have contributed to a substantial increase in the active advertiser count, which grew by 60% in the first quarter. The analyst also observed specific performance enhancements in verticals such as e-commerce, app installs, and product-focused sectors, including broadly retail and consumer packaged goods (CPG).
The continued focus on refining its ad tech appears to be a strategic move by Snap to attract and retain advertisers on its platform by offering them more effective tools for reaching their target audiences and managing advertising spend. The reported growth in the active advertiser count and the specific verticals experiencing performance improvements suggest that the company’s efforts are resonating with its client base. With revenue growing at 14.91% and analysts projecting profitability this year, investors seeking deeper insights can access comprehensive analysis and 8 additional key tips through InvestingPro’s detailed research reports.
In other recent news, Snap Inc reported first-quarter results that exceeded expectations, with revenue reaching $1.4 billion, marking a 14% year-over-year increase. Despite this strong performance, Snap did not provide guidance for the second quarter due to macroeconomic uncertainties, leading several analyst firms to adjust their outlooks. Stifel maintained a Hold rating with an $8 target, while Cantor Fitzgerald reduced the price target to $7, citing macroeconomic challenges. Susquehanna also lowered its price target to $8, maintaining a Neutral rating, while BMO Capital Markets adjusted its target to $13 but kept an Outperform rating. Analysts noted the significant growth in Snap’s direct response advertising segment, which saw a 14% year-over-year increase. The company’s subscriber count for Snapchat+ nearly reached 15 million, representing a 59% increase compared to the previous year. Meanwhile, TikTok faces a $600 million fine from the EU for data protection concerns, with the company planning to appeal the decision. TikTok has implemented new data security measures and claims these steps are not fully acknowledged by the ruling.
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