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On Wednesday, Stifel analysts maintained their Hold rating on Snap Inc (NYSE:SNAP) with a steady price target of $8.00. The analysts’ commentary followed Snap’s first-quarter performance, which surpassed Wall Street’s expectations. The stock, currently trading at $7.75, has shown strong momentum with a 13.91% gain over the past week. Despite a challenging macroeconomic environment, the company reported continued revenue growth of 14.91% year-over-year. However, there was a lack of clarity regarding the contribution of advertising revenue versus that from Snap’s subscription service, Snapchat+.
The company has adjusted its operational expenditure expectations for 2025 downwards, while the targets for infrastructure and daily active users remain the same. This move aims to align investments with internal revenue projections. With a healthy current ratio of 4.3, Snap maintains strong liquidity to support its operations. The first-quarter results showed notable strength in North America, though Europe and the rest of the world did not meet expectations. Direct Response (DR) advertising, which accounts for 75% of Snap’s revenue, saw approximately 60% growth in active advertisers, especially among small and medium-sized businesses (SMBs).Want deeper insights into Snap’s financial health and growth potential? InvestingPro subscribers get access to exclusive analysis, including 7 additional ProTips and comprehensive valuation metrics.
Despite these positive aspects, the Stifel analysts expressed caution due to the current lack of visibility in the near term and concerns that Snap might be among the first platforms where brands could reduce advertising budgets. However, InvestingPro data shows analysts expect the company to achieve profitability this year, with a forecasted EPS of $0.33 for FY2025. The analysts’ stance remains unchanged as they continue to recommend Hold on Snap stock.
In other recent news, Snap Inc. reported a strong first-quarter performance, with revenue reaching $1.4 billion, a 14% year-over-year increase, surpassing both Susquehanna’s estimates and consensus. The company’s direct response advertising business grew by 14% year-over-year, while its brand advertising segment saw a 3% decline. Despite these gains, Snap decided not to provide guidance for the second quarter due to macroeconomic uncertainties, a move that has led several analysts to adjust their price targets. Cantor Fitzgerald reduced its target to $7, citing concerns about Snap’s susceptibility to economic changes, while Susquehanna lowered its target to $8, maintaining a Neutral rating. BMO Capital Markets cut its target to $13, highlighting a 60% increase in active advertisers, and Barclays (LON:BARC) reduced its target to $15, noting Snap’s revenue and EBITDA figures slightly exceeded expectations. BofA Securities also adjusted its target to $10, maintaining a Neutral rating, and expressed concerns about user growth saturation and high stock-based compensation expenses. Despite these challenges, Snap continues to see a notable increase in daily active users, reaching 460 million, with its premium service, Snapchat+, nearing 15 million subscribers, a 59% increase year-over-year.
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