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Investing.com - RBC Capital lowered its price target on Snap Inc (NYSE:SNAP) to $10.00 from $12.00 on Wednesday, while maintaining a Sector Perform rating on the social media company’s stock. Currently trading at $7.78, Snap’s market capitalization stands at $13.1 billion, with analyst targets ranging from $7 to $16. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.
The price target reduction follows what RBC Capital described as a "tough Q2" for Snap, with execution on ad platform development and surface expansion efforts not proceeding according to plan.
RBC Capital noted this underperformance would "continue to reinforce the bear case that SNAP cannot break out of being a smaller ad platform lacking the ability to durably grow its direct response business in-line with the market."
The firm did identify several bright spots for Snap, including Sponsored Snaps development, increased Spotlight engagement, Snapchat+ subscriber growth, and new measurement tools.
Despite these positive developments, RBC Capital observed that "anecdotes of improvement continue to not show up in financials," leading to the lowered price target while maintaining its neutral Sector Perform rating.
In other recent news, Snap Inc reported second-quarter revenue that aligned with expectations, but its EBITDA fell $6 million short of prior estimates, according to Cantor Fitzgerald. The company experienced a slowdown in advertising revenue growth, which decelerated by 5 percentage points to 4% year-over-year, influenced by ad platform issues and Ramadan comparisons. Guggenheim noted a decline in advertising revenue growth from 9.3% in the first quarter to 3.8% in the second quarter, with direct response advertising showing notable deceleration. Rosenblatt Securities highlighted an error in Snap’s ad auction system that led to unintended discounts in April, prompting a price target reduction to $8.70. Stifel maintained a Hold rating and an $8.00 price target, acknowledging mixed results and challenges, including issues with a new auction dynamic. Wells Fargo (NYSE:WFC) lowered its price target to $7.00 due to weaker second-quarter trends and revised ad revenue forecasts for fiscal years 2025 and 2026. Despite these challenges, Snap’s performance continues to be closely monitored by analysts.
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