On Monday, BMO Capital Markets adjusted its outlook on Snap Inc (NYSE:SNAP), reducing the price target to $18.00 from the previous $20.00 while keeping an Outperform rating on the stock. The adjustment comes amid a blend of positive user engagement trends and short-term brand challenges.
The firm highlighted several key growth indicators for Snap, including a 25% year-over-year increase in total time spent on the platform and a 6% rise in monthly active users (MAUs) since the end of 2023, bringing the total to 850 million. Additionally, the number of advertisers on Snap has doubled over the past year, signaling robust commercial interest in the platform.
Despite these positive signs, BMO Capital has tempered its target price due to near-term weakness in brand advertising. The firm remains optimistic, however, about the potential for Snap to attract direct response (DR) advertising budgets given the improving engagement metrics.
Furthermore, BMO Capital anticipates that the upcoming Snap Partner Summit, scheduled for September 16, could act as a significant catalyst for the company's stock. The event is expected to showcase new artificial intelligence tools aimed at content creators and advertisers, which could further enhance the platform's appeal and functionality.
In summary, while the immediate outlook for brand advertising presents challenges, BMO Capital maintains a positive long-term stance on Snap Inc, supported by strong user engagement and the anticipated roll-out of innovative tools for stakeholders on the platform.
In other recent news, Snap Inc. reported its second quarter 2024 earnings, revealing a 16% year-over-year increase in total revenue, which reached $1.24 billion. Advertising revenue, the primary source of this total, rose by 10% year-over-year to $1.13 billion. The company also reported significant user engagement, with over 850 million monthly active users and 432 million daily active users.
In other developments, Snap Inc. announced partnerships with Snowflake (NYSE:SNOW) and LiveRamp to facilitate the adoption of the privacy-centric Conversions API. The Snapchat Plus subscription service now boasts over 11 million subscribers. Looking ahead, the company provided a positive outlook for the third quarter, projecting a revenue growth of 12% to 16% and an estimated Adjusted EBITDA of $70 million to $100 million.
Despite the weaker brand advertising environment in certain consumer discretionary verticals, the company remains optimistic about its direct response business and the potential of small and medium-sized business advertisers to contribute to long-term growth.
InvestingPro Insights
As investors assess BMO Capital Markets' revised outlook on Snap Inc, real-time data from InvestingPro offers a deeper dive into the company's financial health and market performance. The market capitalization of Snap stands at $14.42 billion, reflecting its current valuation in the market. Despite the platform's user engagement growth, the stock has faced significant pressure, with a notable price decline of 29.89% over the last week and 42.86% over the past month. This aligns with an InvestingPro Tip indicating that the stock has taken a big hit recently.
On the financial front, Snap's revenue growth remains positive, with an 11.08% increase over the last twelve months as of Q2 2024, showing resilience in its ability to generate sales. However, the company's P/E ratio is currently negative at -13.11, underscoring its lack of profitability in the same period. Another InvestingPro Tip worth noting is that analysts predict the company will be profitable this year, which could be a turning point for investors considering the stock's future prospects.
For those looking to delve further into Snap's potential and risks, InvestingPro offers additional insights, including 12 more InvestingPro Tips available at https://www.investing.com/pro/SNAP, which can help investors make a more informed decision.
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