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On Wednesday, BMO Capital Markets adjusted its outlook on Snap Inc (NYSE:SNAP) by reducing the price target from $16.00 to $13.00, while still maintaining an Outperform rating on the company’s shares. Currently trading at $9.09 with a market capitalization of $15.4 billion, InvestingPro analysis suggests the stock is currently undervalued relative to its Fair Value. The adjustment comes in the wake of Snap’s shares falling sharply in after-market trading. The decline was attributed to the company’s decision not to provide revenue guidance for the second quarter of 2025, citing minimal visibility due to macroeconomic uncertainties. Additionally, Snap reported a quarter-over-quarter decrease in daily active users (DAUs) in North America for the first quarter of 2025.
Despite these challenges, BMO Capital highlighted a notable 60% year-over-year increase in active advertisers on the platform, which led to a 14% growth in direct response (DR) advertising revenue. This growth remained stable compared to the fourth quarter of 2024 and was considered impressive given the tougher year-over-year comparisons. According to InvestingPro data, Snap’s overall revenue growth stands at 14.91%, with a healthy current ratio of 4.3, indicating strong liquidity.
The research firm also pointed out Snap’s strategic focus on content creators as a positive move. This focus is believed to be enhancing user engagement on the platform, which could help mitigate further declines in North American DAUs. The firm’s decision to maintain an Outperform rating despite lowering the price target reflects an expectation of potential future growth for Snap, based on these strategic initiatives.
In summary, while Snap faces visibility challenges and a dip in North American DAUs, BMO Capital Markets sees the robust growth in active advertisers and stable DR Ad revenue as positive signs. The firm’s revised price target reflects a more cautious outlook but also suggests confidence in the company’s long-term strategy to improve engagement and advertiser growth. InvestingPro has identified several additional promising indicators for Snap, including expected net income growth this year and significant return over the last week (+13.91%). Subscribers can access the full Pro Research Report featuring comprehensive analysis and 7 additional ProTips for deeper insights into Snap’s potential.
In other recent news, Snap Inc. reported its first-quarter 2025 earnings, revealing a revenue of $1.36 billion, which surpassed expectations of $1.35 billion, and an EPS of -0.08 against a forecast of -0.13. Despite these positive results, the company refrained from providing formal guidance for the second quarter due to macroeconomic uncertainties. Analysts from Barclays (LON:BARC), BofA Securities, Goldman Sachs, and Evercore ISI have all adjusted their price targets for Snap, citing various concerns and maintaining their respective ratings. Barclays lowered its target to $15, maintaining an Overweight rating, while BofA reduced its target to $10, keeping a Neutral stance. Goldman Sachs also decreased its target to $8.50, retaining a Neutral position, and Evercore ISI cut its target to $11, maintaining an In Line rating. Analysts highlighted challenges such as user growth saturation, high stock-based compensation expenses, and macroeconomic headwinds impacting advertising revenue. Despite these challenges, Snap’s management remains focused on strategic initiatives, including augmented reality and direct response advertising, to drive future growth.
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