On Friday, Bernstein SocGen Group has increased the price target for Snap Inc (NYSE: NYSE:SNAP) to $14, up from the previous $12, while maintaining a Market Perform rating on the stock. This adjustment reflects the analyst's recognition of the company's recent performance and potential stability in its financial operations.
The adjustment comes in the wake of Snap's recent earnings, which surpassed investor expectations, particularly in the area of adjusted EBITDA. The company has demonstrated a level of control over its expenses that has impressed the analyst, including a strategic approach to its stock buyback program.
The analyst's report indicates that Snap's management has been effectively managing gross margins and stock-based compensation (SBC), keeping a close watch on 'below the line' expenses. This financial discipline is seen as a positive sign for the company's future.
Snap's ability to sustain revenue growth is a key factor that is still being monitored. The analyst suggests that consistent growth over several quarters could pave the way for a narrative of multi-year growth recovery for the company. However, until such a pattern is established, the firm adopts a cautious stance, opting to observe the company's performance before making further endorsements.
The revised price target of $14 is based on a 50/50 combination of a 2025 enterprise value-to-sales (EV/Sales) multiple of 4.5 times, up from the previous 3.5 times, and a discounted cash flow (DCF) analysis with a weighted average cost of capital (WACC) of 10% and a terminal growth rate of 3.0%. The sales estimate for 2025 has been modestly increased from $6.3 billion to $6.4 billion, contributing to the new price target.
InvestingPro Insights
Following Bernstein SocGen Group's updated price target for Snap Inc (NYSE: SNAP), current metrics from InvestingPro shed light on the company's financial landscape. Snap's market capitalization stands at $18.82 billion, reflecting its position in the market. Despite the company not being profitable over the last twelve months, as indicated by a negative P/E ratio of -14.46, analysts predict that the company will turn a profit this year, which could signal a potential turnaround in financial health.
InvestingPro Tips suggest that Snap operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, providing some financial stability. However, the company's Price / Book multiple is high at 7.79, which could indicate that the stock is currently valued at a premium relative to its book value. Additionally, Snap does not pay a dividend, which may be a consideration for income-focused investors.
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