Snap Falls Flat: Here's What Wall Street Thinks Of Snapchat's Dismal Q3

For the third time since its IPO earlier this year, Snap Inc SNAP stock tanked on Wednesday following a disappointing earnings report. With Snap down 16 percent on the day, plenty of Wall Street analysts weighed in on whether it’s time to buy the dip or investors should not try to catch the falling knife.

Here’s what five analysts had to say.

Failing To Provide Long-Term Clarity

UBS analyst Eric Sheridan said “growing pains” are one thing, but Snap has consistently failed to provide clarity on long-term questions.

“While many of those questions remain unanswered after a third earnings report, it is now very likely that SNAP will continue to struggle on multiple fronts in the coming 12 months - a redesigned app could bring opportunity but also platform disruption & trying to scale its ad business as user growth is tepid while competing against GOOG, FB & AMZN is likely going to prove difficult,” Sheridan wrote.

JPMorgan analyst Doug Anmuth said the transition to a programmatic ad platform and the Snapchat app redesign are bad signs for investors in the near-term.

“While 4Q is a seasonally stronger quarter for brand advertisers and Snap will soon complete its transition to programmatic, we believe it will still take time for the advertiser base to ramp spending and changes to the app UI carry significant risk,” Anmuth wrote.

Credit Suisse analyst Stephen Ju said once Snap’s programmatic ad transition hits 100 percent and its auction revenue hits the 50 percent threshold, ad pricing will begin to recover.

“Hence we do not view our investment thesis as being impaired but rather moving at a slower pace than we had hoped,” Ju wrote.

Monetization

Wedbush analyst Michael Pachter said the $39.9 billion write-down of Spectacles wasn’t surprising, but the size of the write-down was.

“I expected a write-down, but that is a pretty big one and implies hundreds of thousands of units in inventory,” Pachter told Benzinga.

Bank of America analyst Justin Post said Snap and its monetization process are still works in progress.

“We are constructive on Snap's demographics and high engagement, however remain cautious on upside vs. peers given slowing user growth, high US saturation in its core demo and intense competition,” Post wrote.

Ratings And Price Targets

Wall Street is polarized on Snap stock, with some analysts seeing a buying opportunity and others a dangerous gamble:

• UBS has a Sell rating and $7 target.
• JPMorgan has an Underweight rating and $10 target.
• Credit Suisse has an Outperform rating and $17 target.
• Bank of America has a Neutral rating and $16 target.

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