What the bad jobs report means for markets
Friday, BMO Capital adjusted its price target on Snap Inc (NYSE: NYSE:SNAP) shares, lowering it to $18.00 from the previous $20.00, while maintaining an Outperform rating on the stock. The firm cited several factors for maintaining the positive outlook, including improving user engagement trends, a significant increase in advertiser count, and a recent uptick in US user engagement.
According to BMO Capital, Snap has seen a 25% year-over-year increase in total time spent on the platform, with monthly active users (MAUs) growing by 6% since the end of 2023, reaching 850 million. Additionally, the analyst noted that the number of advertisers on Snap has doubled over the past year. These factors, combined with an inflection in US engagement as of the end of June, are expected to make the platform more appealing to advertisers, particularly those with direct response (DR) budgets.
Despite the positive user and advertiser trends, the firm has reduced the target price for Snap shares due to near-term brand weakness. This adjustment reflects a cautious stance on the immediate revenue prospects from brand advertising on Snap's platform.
The analyst also highlighted the potential for the upcoming Snap Partner Summit, scheduled for September 16, to act as a catalyst for the company's shares. The event is anticipated to showcase effective artificial intelligence tools for creators and advertisers, which could further enhance the platform's attractiveness and utility.
Overall, BMO Capital's stance on Snap reflects optimism about the company's user engagement and advertising growth, tempered by current challenges in brand advertising revenue. The firm's revised price target suggests a cautious but still positive outlook for the company's stock performance in the near term.
In other recent news, Snap Inc. has faced a series of challenges in the digital advertising landscape. The company experienced a significant drop in stock value following a third-quarter outlook that fell short of market expectations. Analysts from Roth MKM and PP Foresight expressed concerns over Snap's ability to maintain consistent performance and boost user engagement amidst intense competition from larger entities such as Meta Platforms Inc (NASDAQ:META).'s Facebook and Instagram, Alphabet (NASDAQ:GOOGL) Inc.'s Google, and ByteDance Ltd.'s TikTok.
JPMorgan recently revised its price target for Snap shares, maintaining an Underweight rating due to concerns about the volatility of the company's brand advertising revenue. This decision follows Snap's second-quarter earnings, which did not meet market expectations partly due to a reduction in brand spending from certain consumer discretionary sectors. Despite Snap's efforts to engage small and medium-sized businesses and expand revenue streams through Snap+, concerns persist regarding the company's ability to secure consistent spending from advertisers.
Snap's revenue for the second quarter reached $1.24 billion, narrowly missing the $1.25 billion anticipated by analysts. The company's projection for the third quarter also fell below Wall Street's expectations, with an anticipated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) lower than the expected $110.8 million.
Benchmark maintained a Hold rating on Snap stock due to concerns about the company's ability to meet near-term consensus expectations amidst a competitive digital advertising landscape. The firm's revenue estimate for 2024 is 3% below consensus, suggesting that consensus forecasts may not fully consider Snap's reliance on operational expenditures to drive revenue growth.
Snap has also expressed support for the Kids Online Safety Act (KOSA), a proposed legislation aimed at establishing a clear "duty of care" for social media companies regarding the use of their platforms by minors. This comes as the U.S. Senate is set to approve significant online child safety reforms, including COPPA 2.0 and KOSA.
InvestingPro Insights
As Snap Inc (NYSE: SNAP) navigates through the challenges and opportunities outlined by BMO Capital, real-time data from InvestingPro provides a deeper financial perspective on the company's current standing. With a market capitalization of $15.6 billion, Snap's financial health and stock performance metrics offer investors additional context. The company's Price / Book ratio, as of Q1 2024, stands at a high 9.94, reflecting the premium that investors are willing to pay for its net assets, which could be due to the potential growth anticipated by the market despite the company not being profitable over the last twelve months.
InvestingPro Tips indicate that Snap's stock has fared poorly over the last month with a price total return of -21.22%, which aligns with the cautious stance taken by BMO Capital regarding near-term brand weakness. However, a silver lining is seen in the company's liquidity position, where liquid assets exceed short-term obligations, suggesting financial resilience in covering short-term debts. Additionally, analysts predict the company will be profitable this year, which may provide a positive outlook for long-term investors.
For those looking to delve deeper into the company's financials and stock performance, InvestingPro offers a total of 8 additional tips on Snap Inc, which can be found at https://www.investing.com/pro/SNAP. These insights, combined with the latest financial metrics, can help investors make more informed decisions in the context of the evolving social media landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.