Jefferies: Snap's New CFO Is A Positive, Decline In User Growth A Concern

Snap Inc. SNAP’s second-quarter earnings report revealed a mixed picture from the social media platform, according to Jefferies. 

The Analyst

Jefferies analyst Brent Thill maintained a Hold rating on Snap with a $14 price target. 

The Thesis

Despite the rapid decline of daily active users and Jefferies' preference for Facebook.com, Inc. FB among social media stocks, Thill said Snap does have key catalysts for its future success. (See the analyst's track record here.) 

The addition of CFO Tim Stone is benefiting Snap's operational efficiency and communication with the Street, the analyst said. Stone's extensive experience at Amazon.com, Inc. AMZN is valuable, Thill said. 

Revenue rose 44 percent year-over-year, driven by strength in Australia and self-serve, the analyst said. 

The decline in Snap’s overall user growth is concerning, as it can cause negative network events, Thill said. Snap is working to improve its functionality on the Android platform, but has not released a timeframe for doing so, he said.

“Longer-term we like the move toward a programmatic self-serve platform for all ad-units, which will help to increase reach to a greater number of advertisers (opening up more opportunities for growth)," Thill said. "However, we expect near-term pressure on pricing to continue, which will weigh on top-line growth near term." 

Price Action

Snap shares were sliding 7.62 percent to $12.12 at the time of publication Wednesday. 

Related Links:

BTIG Maintains Neutral Snap Thesis Ahead Of Q2 Report, But 'Patience Is Wearing Thin'

The Week Ahead: Earnings From Disney, Roku And Snap, Rite Aid Votes On Albertsons Deal