On Friday, Roth/MKM reiterated its Buy rating on shares of Snap Inc (NYSE:SNAP), maintaining a $15.00 price target for the company's shares. The firm's stance remains positive despite Snap's year-to-date performance, which saw its shares fall by 21%, underperforming the S&P 500's 14% gain. Additionally, Snap's shares have dropped 20% since early May, negating the initial positive response to its first-quarter earnings.
The optimistic outlook from Roth/MKM is partly based on recent ad agency channel checks which suggest potential for a revenue uptick. Analysts believe that a small beat and bracket result from Snap's upcoming earnings per share (EPS) report could lead to an increase in its stock price.
They note that improvements in direct response (DR) advertising technology, a likely partnership with Amazon (NASDAQ:AMZN), and traction with Snap+ contribute to a more confident short-term revenue forecast.
Despite these positive indicators, Roth/MKM acknowledges that Snap continues to face challenges with consistent execution, which has kept the company in what the firm refers to as a "long-term penalty box." The firm's analysis suggests that while there are factors that could boost Snap's performance in the near term, there are ongoing concerns about the company's ability to maintain steady progress.
The reaffirmed Buy rating and price target reflect the firm's belief that Snap has the potential to overcome recent setbacks if it can capitalize on its advertising technology and rumored collaborations. Roth/MKM's comments indicate a cautious optimism for Snap's ability to deliver results that could positively impact its share value in the aftermath of its earnings report.
In other recent news, Snap Inc. has been making significant strides in its financial performance and operations. Morgan Stanley recently upgraded Snap's stock from Underweight to Equalweight, reflecting the company's improved advertising business performance.
Furthermore, BMO Capital Markets maintained an Outperform rating on the company, highlighting a surge in user engagement due to successful iOS platform updates and the introduction of Sponsored Augmented Reality Filters.
Snap Inc. has also announced plans to raise $650 million through a private placement of convertible senior notes due in 2030, with an additional offering of $100 million in notes subject to market conditions. The proceeds will be used for general corporate needs, potential acquisitions, and repurchasing part of existing convertible senior notes due in 2025 and 2026.
In its first quarter 2024 results, Snap reported a robust 21% increase in revenue year-over-year, attributed to enhancements in its advertising platform and a rise in demand for its solutions. The company also reported a significant uptick in daily active users, reaching 422 million, marking a 10% increase from the previous year. Looking ahead, Snap anticipates a revenue growth of 15% to 18% for the second quarter.
In line with a broader trend of workforce reductions across North American tech firms, Snap has announced job cuts. These developments reflect the ongoing momentum in Snap's operations and financial performance.
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