On Tuesday, BMO Capital maintained its Outperform rating on Snap Inc (NYSE:SNAP) shares with a steady price target of $18.00. The rating affirmation comes as Snap Inc. collaborates with Google (NASDAQ:GOOGL) Cloud to bolster its artificial intelligence features on its platform. This technological enhancement, particularly the implementation of the Gemini multi-modal capability for the My AI feature, has led to a significant increase in user engagement within the United States.
The deployment of Gemini has reportedly escalated user interaction by 2.5 times in the U.S., marking a notable uptick in platform activity. BMO Capital notes that while there are execution risks, the cost of goods sold (COGS) is showing signs of slowing down. This deceleration follows a period where Snap invested heavily in artificial intelligence and machine learning technologies.
Snap's recent endeavors to revamp its app are also seen as a positive move by BMO Capital. These initiatives are expected to drive further user engagement. In addition to the enhanced AI capabilities, the introduction of new advertising formats is anticipated to attract additional ad budgets. The firm suggests that the combination of these developments could provide Snap with a competitive advantage in the market.
The analyst believes that these strategic moves by Snap, including the AI advancements and app improvements, will likely result in increased user engagement. This, in turn, could lead to a more robust flow of advertising budgets to the platform. The maintained Outperform rating reflects BMO Capital's confidence in Snap's potential for growth and its ability to capitalize on these technological and strategic enhancements.
InvestingPro Insights
As Snap Inc. (NYSE:SNAP) continues to make headlines with its strategic AI advancements, current metrics and insights from InvestingPro provide a deeper look into the company's financial health and market position. According to InvestingPro data, Snap has experienced a significant return over the last week, which aligns with the increased user engagement reported by BMO Capital. This uptick in platform activity may be a driving factor behind the stock's recent performance.
However, InvestingPro Tips suggest caution; analysts have revised their earnings expectations downwards for the upcoming period, indicating potential headwinds for the company. Additionally, the stock is currently in overbought territory based on the Relative Strength Index (RSI), which could signal a pullback in the near term.
Despite these concerns, Snap's liquid assets exceed its short-term obligations, providing the company with a stable financial buffer. It's also worth noting that while Snap has not been profitable over the last twelve months, analysts predict the company will turn a profit this year.
For investors seeking a comprehensive view of Snap's financials and market potential, InvestingPro offers additional tips and insights. Currently, there are 10 more InvestingPro Tips available for Snap Inc., which can be accessed for those looking to make an informed investment decision.
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