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Investing.com - Wells Fargo (NYSE:WFC) raised its price target on Snap Inc (NYSE:SNAP) to $11.00 from $8.00 while maintaining an Equal Weight rating, citing expectations for accelerated revenue growth in an improving advertising environment. According to InvestingPro data, SNAP currently trades at $8.69, with analysis suggesting the stock is slightly undervalued based on its Fair Value calculation.
The firm revised its second-quarter total revenue growth forecast to 13% year-over-year, up from its previous estimate of 6% and above consensus expectations of 8%. Wells Fargo projects $165 million in subscription revenue for the quarter, with direct response advertising growing 13% year-over-year and brand advertising remaining flat. This aligns with SNAP’s strong financial position, evidenced by a healthy current ratio of 4.3 and moderate debt levels.
For the second quarter, Wells Fargo expects Snap to deliver $76 million in EBITDA, significantly above the consensus estimate of $40 million. The firm anticipates Snap will provide third-quarter revenue guidance of $1.54 billion to $1.58 billion, representing 12-15% year-over-year growth. While SNAP wasn’t profitable in the last twelve months, InvestingPro analysis indicates the company is expected to turn profitable this year. Get access to 6 more key InvestingPro Tips and comprehensive financial analysis in the Pro Research Report.
Wells Fargo views Sponsored Snaps as a compelling opportunity to monetize Snap’s chat surface, which accounts for 60% of time spent on the platform. The firm estimates this feature could contribute nearly $400 million in revenue by 2027, with approximately $20 million expected in the second quarter of 2025.
User engagement in the U.S. and Canada remains under pressure, with daily active users declining 4% year-over-year in the second quarter according to SensorTower data, while international user growth (excluding U.S. and Canada) appears stable at 8% year-over-year.
In other recent news, Snap Inc. announced plans to release a new version of its augmented reality glasses, Specs, to the public in 2026. This development was revealed at the Augmented World Expo 2025, where the company also introduced updates to its operating system, Snap OS. These updates include integrations with OpenAI and Google (NASDAQ:GOOGL) Cloud, enabling developers to create AI-powered applications. In financial news, Loop Capital Markets revised its price target for Snap’s shares to $12, down from $16, while maintaining a Buy rating. This adjustment reflects a more conservative sales multiple, though the firm remains optimistic about Snap’s user base and revenue growth potential. Additionally, Benchmark reaffirmed its Hold rating on Snap, noting improvements in the company’s advertising technology, which now accounts for a significant portion of its revenue. The analyst highlighted advancements in ad targeting capabilities and a substantial increase in active advertisers. Meanwhile, TikTok, owned by ByteDance, is under scrutiny by the European Commission for potentially violating the EU’s Digital Services Act regarding advertisement information. TikTok also faces a $600 million fine from the EU’s privacy regulator over data protection concerns, with demands to halt data transfers to China unless compliance standards are met.
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