Snap Stock Plummets On Heels Of 'Choppy' Q4 Results: 4 Analysts Await 'Consistent Execution'

Shares of Snap Inc SNAP fell off a cliff Wednesday, Feb. 7, as the social media company’s fourth-quarter (Q4) revenue came in shy of analyst estimates.

Snap said Q4 revenue came in at $1.361 billion, which missed the consensus estimate of $1.38 billion, according to Benzinga Pro. The company reported quarterly adjusted earnings of 8 cents per share, which beat analyst estimates of 6 cents per share.

On last check Wednesday, the stock was down Wednesday more than 35%, trading at about $11.32. Here are some key analyst takeaways:

• JPMorgan analyst Doug Anmuth maintained Underweight while raising his price target from $9 to $11 a share.
• Stifel analyst Mark Kelley has a Hold rating on the stock with a price target of $14 a share.
• Truist Securities analyst Youssef Squali reiterated a Hold rating while raising the price target from $11 to $12 a share.
• Oppenheimer analyst Jason Helfstein gave a Perform rating on the stock.

Check out other analyst stock ratings.

JPMorgan: “Results have been choppy through macro noise and the DR rebuild,” said Anmuth. Despite facing headwinds, the investment proposition for Snap remains robust, boasting a significant market opportunity, an engaged user base, and a proven track record of innovation.

However, short-term hurdles loom large due to ongoing infrastructure investments impacting the 1Q bottom line. Cost-saving measures from recent workforce reductions will only materialize in 2Q. Despite a better start in 2024, Snap’s stock volatility remains a concern, requiring sustained improved execution to instil investor confidence.

Stifel: Kelley said that the restructuring announcement on Monday likely set a higher bar for what the market anticipated in terms of 1Q adjusted EBITDA (excluding restructuring costs). Unfortunately, management did not provide details on Opex savings for 2024, and marketing expenses are expected to rise. Stifel is adopting a cautious stance until a more substantial shift in budgets becomes clearer.

Truist Securities: Squali is “awaiting more consistent execution, as the company makes progress in repositioning itself for faster growth and improving margins thru investments in ad products, user engagement, and workforce reductions.”

The results for the fourth quarter of 2023 were a mixed bag. There were positive signs in Direct Response (DR) and margin enhancement, but analysts noted lower monetization of Daily Active Users (DAU). Snap is also grappling with the loss of market share to larger advertising platforms, including Alphabet GOOG GOOGL, Meta Platforms META, and Amazon.com Inc AMZN, attributed to its evolving product lineup and lower engagement with small and medium-sized businesses.

Oppenheimer: “Snap faces challenges due to its limited scale, resulting in a decline in revenue share compared to larger social media counterparts,” Helfstein said.

North American daily active users saw a 1% sequential decline—the first since 3Q18. Ad revenue (excluding Snapchat+) grew modestly by 1% year-over-year. A guided range of 5%-9% year-over-year for 1Q was notably lower than competitors. Despite Spotlight’s growth, it fails to fully offset weaknesses in Stories. Direct response showed a 3% year-over-year increase, despite endeavors to shift focus away from brand initiatives.

SNAP Price Action: SNAP stock was trading at $11.32 at last check on Feb. 7.

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