Snap Shares Tank On AI Investment Plans: What Else Caused Analysts To Cut Price Targets?

Shares of Snap Inc SNAP Friday crashed in premarket trading, after the company reported a first-quarter revenue miss. Here are some key analyst takeaways from the earnings call.

RBC Capital Markets On Snap

Analyst Brad Erickson maintained a Sector Perform rating while reducing the price target from $10 to $9.

Snap’s woes remain unchanged and the company “continues struggling with developing alternative measurement tools to solve the Apple signal loss as well as being able to drive improving ROAS for its ad customers,” Erickson stated.

“Additionally, it's now increasing its focus on further infrastructure investment to try and find new targeting and measurement solutions which weigh on margins incrementally,” he added.

Truist Securities On Snap

Analyst Youssef Squali reiterated a Hold rating while reducing the price target from $8 to $7.

“A miss on both the top and bottom lines, and a 2Q23 outlook that's below expectations show that macro headwinds, targeting signal loss, competition and leadership changes continue to weigh on SNAP's growth,” Squali wrote in a note.

“Mgmt's decision to transition to a new ad format and invest aggressively in ML to accelerate content and ad platform ranking to re-accelerate growth makes sense to us, but it's likely to take time,” he added.

Morgan Stanley On Snap

Analyst Brian Nowak maintained an Underweight rating while reducing the price target from $7 to $6.50.

“SNAP remains early in its migration to build a direct response/performance advertising business, which carries uncertainty and high execution risk,” Nowak said. “SNAP is seeing a pullback from some its largest/most sophisticated advertisers, who are seeing a deterioration in return as a result of the transition,” he added.

“Meanwhile ramping Machine Learning (ML) investments places significant downward pressure on profitability,” the analyst further wrote.

Check out other analyst stock ratings.

JMP Securities On Snap

Analyst Andrew Boone reaffirmed a Market Perform rating on the stock.

Snap’s quarterly results included a revenue miss of around 2% and EBITDA shortfall of around $10 million versus consensus estimates, Boone said in a note. The second-quarter guidance suggests a 6% year-over-year decline in revenues “as Snap's advertising rebuild continues,” he added.

“Snap is increasing its AI investments as we worry this could be the beginning of a new investment cycle,” the analyst further wrote.

KeyBanc Capital Markets On Snap

Analyst Justin Patterson reiterated a Sector Weight rating on the stock.

Snap is witnessing “some advertiser disruption from ad platform updates,” Patterson said.

“Given return profiles in areas like AR are currently unclear, we expect there will be skepticism that Snap's latest investments in AI will drive near-term returns,” the analyst wrote. The company’s ad peers offer “faster growth and more meaningful margins,” he added.

SNAP Price Action: Shares of Snap had declined by 19% to $8.51 at the time of publishing Friday.

Read Next: Here's Why Snap Is Moving

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