On Wednesday, Citi reaffirmed its Neutral rating on Snap Inc (NYSE:SNAP), with a consistent price target of $11.00. The stance comes in the wake of Snap's 2024 Partner Summit, where the company unveiled its latest product innovations. Citi highlighted the potential of Snap's new Simple Snapchat redesign, currently in beta, and its 5th Generation Spectacles as possible long-term drivers for user engagement growth.
The redesign aims to streamline the user experience among Snap's over 850 million monthly active users (MAUs) by clearly separating Chat and Stories content from friends and creator-driven content via Spotlight, which itself boasts 500 million MAUs. The analyst from Citi noted the impressive capabilities of SnapOS and its applications across learning, gaming, and productivity, which align with the company's long-term vision for its augmented reality (AR) computing platform.
Despite the optimism around the product developments and the introduction of new advertising formats like Sponsored Snaps and Promoted Places, both in beta, Citi's rating remains unchanged due to ongoing challenges with monetization. The firm expressed the need for consistent execution by Snap before adopting a more positive outlook on the company's shares.
The new Spectacles, embedded with SnapOS, were also recognized for their potential to enhance Snap's AR ecosystem. These innovations are part of the company's strategy to boost engagement among its users by offering an improved and more intuitive platform experience.
Citi's evaluation reflects a cautious but observant approach, acknowledging Snap's innovative steps while also considering the broader challenges the company faces in converting these developments into consistent revenue streams. The firm's current price target and rating stand as a result of these balanced considerations.
In other recent news, Snap Inc. has been making significant strides in its operations. The company reported a 16% year-over-year increase in total revenue, reaching $1.24 billion in Q2 2024, with advertising revenue accounting for $1.13 billion. Looking ahead, Snap projects a revenue growth of 12% to 16% for Q3 2024, along with an estimated Adjusted EBITDA of $70 million to $100 million.
In the realm of mergers and acquisitions, Sahara AI, a startup that has partnered with Snap, recently secured $43 million in a funding round led by Pantera Capital. This move is expected to expand Sahara AI's team, improve its platform's performance, and enlarge its developer ecosystem.
Analyst firms have been keeping a close eye on Snap's progress. Deutsche Bank maintained a positive outlook on Snap, affirming a Buy rating, while Roth/MKM maintained a Neutral rating, expressing concerns about the company's consistent performance. On the other hand, BMO Capital Markets maintains an Outperform rating, highlighting a 25% year-over-year increase in total time spent on its platform.
Snap has welcomed Jim Lanzone, the current CEO of Yahoo Inc., to its board of directors, as it refocuses its efforts on its advertising business and invests in augmented reality technology. The company has introduced new advertising products and is set to introduce new advertising placements that leverage machine learning and automation technologies.
Lastly, the company is developing augmented reality offerings, including smart glasses, and its Snapchat Plus subscription service now boasts over 11 million subscribers. These recent developments reflect Snap's ongoing commitment to growth and innovation in the tech industry.
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