Analyst: Expect Even Greater Seasonality To Snap Revenue Than Expected

Citing slower-than-expected new advertiser adoption, Oppenheimer said it expects even greater seasonality for Snap Inc SNAP in the second half of 2017.

Even as near-term fundamentals look a little shaky, a report released by FIS Astec Analytics showed that the company's shares were hot favorites among short sellers this week.

Adoption Slowed, But Could Be Resolved Over Time

Analysts Jason Helfstein, Jed Kelly and Alec Brondolo attributed the slower adoption by new advertisers to platform-specific video ads, limited 3P data and brand safety concerns for user-generated story ads.

The analysts clarified that, though Oppenheimer expects headwinds to be resolved over time, they are taking a more conservative view on second-quarter revenues.

Oppenheimer sees the effect of Custom Stories, launched in May, on second quarter to be diluted, as SNAP calculates the quarterly daily average user as a full three-month average, rather than as a last-month average. That said, the firm expects the feature to increase user engagement.

U.S. Android Engagement Increased

The firm noted that the U.S. Android engagement rose to 80 percent of iOS in April versus 55 percent in the year-ago period.

"We believe this reflects management's effort to improve low-end Android device performance, low-hanging fruit in our view," the firm added.

Adjusting Estimates

Accordingly, Oppenheimer lowered its second-quarter revenue estimate by $5 million but proportionately increased the fourth-quarter revenue estimate by the same amount.

Oppenheimer has an Outperform rating and a 12–18-month price target of $23 for the shares of the company.

Snap shares closed Thursday's regular session down 3.63 percent at $18.85.