4 Snap Analysts Size Up Q2 Results, Investors Ghost The Stock: 'Structurally Challenged'

Analysts are sizing up the long-term opportunity for Snap Inc SNAP and whether the company can compete with other social media platforms after the company reported second-quarter financial results Tuesday. 

The Snap Analysts: Benchmark analyst Mark Zgutowicz has a Hold rating and no price target.

RBC Capital analyst Brad Erickson has a Sector Perform rating and $9 price target.

JMP Securities analyst Andrew Boone has a Market Perform rating and no price target.

KeyBanc analyst Justin Patterson has a Sector Weight rating and no price target.

Related Link: Challenges For Snap Balancing P&L Improvement With Product Investment

The Snap Takeaways: Snap’s dependence on certain items for revenue remains clear, according to Zgutowicz.

The analyst said there is no long-term strategy as the company bounces between revenue growth and cost initiatives.

“SNAP’s revenue dependencies on headcount remain elevated and perhaps even higher than feared, digital share losses continue to mount witnessed by a fourth consecutive quarter of year-over-year pricing degradation despite SNAP prices already at social lows,” Zgutowicz said.

The analyst said management is “walking a tightrope” while trying to hold up revenue.

Snap's guidance couldn’t offset the second-quarter beat, according to Erickson.

“We see the company as remaining structurally challenged given its knowledge & intent of its users with less ability to affect change through new tools,” Erickson said.

The analyst noted that Spotlight traction was strong in the second quarter and management thinks investments could pay off down the road.

“The narrative of investing and making improvements to its DR platform has been ongoing for nearly the past two years.”

Progress in Snap’s advertising platform isn’t reflected in the results, notes Boone.

“We acknowledge the stable advertising environment, progress with Snap’s advertiser base as it grows 20% year-over-year, and that it continues to be a communication utility for younger users,” Boone said.

“However, we await greater clarify that its new ad platform is resonating with advertisers before becoming more positive on shares.”

The analyst sees Snapchat losing engagement to other short-form video platforms.

“We believe Snap’s programs are resonating with creators, which should help offset Friend Stories weakness, while creating an onramp for Spotlight engagement.”

Boone sees shares as fairly valued as investors await an update on advertising progress.

The capabilities of competitors in several Snap segments has Patterson cautious on the company moving forward.

“With larger companies ahead in measurement, AI capabilities, and budgets, we are incrementally cautious on the duration of this investment cycle to win back advertiser budgets,” Patterson said.

Daily active user growth and time spent watching content were seen as positives for the analyst in the second quarter, but weren’t enough to offset weakness.

“It appears that large advertisers still have not meaningfully come back to the platform.”

SNAP Price Action: Snap shares are down 19% to $10.10 on Wednesday.

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