On Thursday, Evercore ISI adjusted its financial outlook for Snap Inc (NYSE:SNAP), reducing the company’s price target from $15.00 to $14.00 while maintaining an In Line rating. Currently trading at $11.29 with a market capitalization of $19 billion, InvestingPro analysis suggests the stock is slightly undervalued.
The firm’s analysis suggests a challenging first quarter of 2025 for Snap, with tougher comparisons to the prior year’s quarter. According to Evercore ISI, Snap’s year-over-year revenue growth for the first quarter is at risk, with projections indicating a deceleration and a potential quarterly sequential decline.
The revised revenue and EBITDA estimates for Snap’s full fiscal year 2025 have been decreased by 4%. While the company has shown revenue growth of 13.66% over the last twelve months, this adjustment comes as a result of a model sensitivity analysis and intra-quarter data points which indicate potential risks to the consensus Street revenue estimate of $1,341 million for Q1 2025.
According to InvestingPro data, 14 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting mixed sentiment among experts. This estimate suggests a 12% growth year-over-year but also implies a 2 percentage point deceleration against a 16-point tougher comparison, or a 14% decline quarter-over-quarter.
Evercore ISI referenced Snap’s first quarter of 2024 as a basis for comparison, noting that the period had benefitted from one-time factors such as an additional Leap Day and Easter occurring in the quarter, which typically falls in Q2. These factors contributed to a revenue outperformance in Q1 2024, with approximately 50% of the 5 percentage points above the high-end guidance attributed to these one-time benefits.
Despite the cautious outlook on revenue, Evercore ISI considers the Street’s Q1 EBITDA estimate of $80 million for Snap to be achievable or even surpassable. This estimate would equate to a 6% margin, which aligns with management’s comments on maintaining incremental margins between 30%-50% as they balance profitability and growth. InvestingPro analysis indicates the company maintains a FAIR financial health score, with liquid assets exceeding short-term obligations and operating with moderate debt levels. The firm’s commentary suggests that Snap’s management is focused on running the business efficiently while still aiming for expansion.
In other recent news, Snap Inc. experienced a decline in stock due to a legal challenge by TikTok which has led to uncertainty in the social media sector. Meanwhile, Meta Platforms Inc (NASDAQ:META). saw its shares reach a record high following a legal victory that may impact its main competitors. Snap Inc. also received a sustained Buy rating from Guggenheim Securities, with fourth quarter trends aligning with company expectations.
Simultaneously, Splash Beverage Group is actively pursuing mergers and acquisitions, despite facing revenue pressures. Citi revised its revenue forecasts downward for the company for 2024 and 2025, leading to a new price target of $0.50, but maintains a Buy rating citing a favorable risk-reward scenario.
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