Snap Inc (NYSE:SNAP) stock has lived and died—but mostly died—on user numbers, but one analyst team seems to think that things could finally be turning around for the social media/ camera firm. In a departure from the norm when it comes to the Snapchat parent, the analysts raised their price target for its stock.
Snap stock price target boosted
In a note dated Sunday, Deutsche Bank analyst Lloyd Walmsley raised his price target for Snap stock from $11 to $13 per share, citing stronger engagement data for the platform in his firm’s survey. However, he reiterated his Hold rating on it as well, noting that ad checks remain mixed.
He emphasized that he’s “cautious” on the company’s revenue outlook for both the fourth quarter and all of 2018, noting that “conversations in the add community” reveal that challenges in “scaling spend” continue at the platform. He also said that his firm’s December user survey showed that engagement on Snapchat remains strong.
They surveyed more than 500 Snap users last month and found an increase in posting and consumption behavior on the platform. They also found that more users intended to keep using Snapchat, and satisfaction with the Android version of the app was up. Users also reported “improving perceived ad quality.” Further, the firm found that Instagram Stories didn’t have any “discernable effect” on engagement on Snapchat, which is a huge positive, given that analysts generally expected the feature to take a bite out of Snap’s platform.
Following the survey, Walmsley tweaked his estimate for daily active user growth in the fourth quarter up to 6 million from 4 million previously. He pegs Snap’s ad revenues at $243 million, an increase of $39 million quarter over quarter, and total revenue at $246 million, which is far below the consensus of $257 million. He estimates Snap’s adjusted EBITDA loss at $207 million, which is worse than the consensus at a loss of $187 million.
Mixed feelings on new Snapchat app
Snap stock continued to slip on Monday following Walmsley’s note, and one reason could be because it focused on how engagement on Snapchat was improving before the company tweaked its app. Other analysts have already expressed concern about what the new app will do to engagement because of the great deal of uncertainty it causes. Walmsley offered up his view of the redesigned app, which he was able to use on an iPhone X:
“Overall, we liked the updated UX, addition of unfluencers to discover, and auto advance of friends’ stories & discover content but we are luke warm [sic] on one core change — combining chat and stories.”
Walmsley felt that combining them makes the page look too crowded and makes it difficult to locate a specific story or chat. He warned that this could cause users to stop engaging with Snapchat or cut back on their use of it, but he was encouraged enough by the findings from his firm’s survey to believe that even if frustrated, core users will keep using it.
Snap “not a good stock…” or company, either: Jim Cramer
Another reason Snap stock could be falling on Monday is because CNBC’s Jim Cramer said in an interview posted on The Street that the stock just isn’t good, and the company isn’t either.
“It does feel like Twitter, before Twitter got resolved. The problem here again is that it’s a communications means, and as a communications means, it’s much harder to value. And I remain committed to the idea that Snap is not a stock because Snap is not a good company.
Snap stock tumbled by about 1% in intraday trading on Monday to as low as $13.67.
