Snap rating cut by bank as ‘ad execution is an issue’

Published 06/08/2025, 13:36
© Reuters

Investing.com -- Snap shares were downgraded by Citizens to Market Perform from Market Outperform following disappointing second-quarter earnings, as advertising revenue growth and user engagement continue to lag behind larger rivals.

Citizens analysts said they were “moving to the sidelines following results” due to “advertising execution still volatile,” and concerns that Snap’s user engagement in key markets is under pressure.

Ad revenue rose just 4% year over year in the second quarter, down from 9% in the prior quarter. 

Citizens said this suggested “share loss to other scaled ad platforms,” especially as North America’s daily active users fell by one million for the second straight quarter.

“We upgraded Snap last year with the thesis that Sponsored Snaps could help accelerate advertising revenue,” Citizens wrote. “However, we were wrong.”

Snap’s Direct Response advertising business also struggled. “While we acknowledge Snap is making progress with direct response as purchase-related ad revenue grew 25% Y/Y in the quarter, DR overall grew just 5% Y/Y as Snap is losing share to other scaled ad platforms,” analysts said. 

A platform update that inadvertently led to campaigns clearing at lower prices also weighed on performance, according to the bank.

Citizens cited “greater competition for user time and attention” as Meta (NASDAQ:META) and TikTok continue to dominate engagement. “We worry that engagement losses are likely to continue as it is unclear to us how Snap wins back users’ time.”

Citizens also flagged concerns around AI underinvestment and ongoing leadership reshuffles, saying: “As leadership changes, execution tends to slip, which creates another risk to estimates for 2026.”

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.