Snap Analysts Issue Mixed Assessments After Earnings Report

Snap analysts, issuing a mix of opinions after the company's fourth-quarter report, say the Snapchat parent needs to speed up revenue growth to sustain its stock rally.
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Snap  (SNAP) - Get Report shares tumbled Wednesday, as several analysts issued reports on the Snapchat parent's mixed earnings report.

The Santa Monica, Calif., photo social-media company reported Tuesday that its daily user base hit 218 million in the fourth quarter, up 8 million, or 3.8%, from the previous quarter. The figures marked the fourth straight quarter of growth in the metric.

Revenue climbed 44% from a year earlier to a record of $561 million.

But the company posted a loss of $240.7 million, or 17 cents a share, for the latest quarter, widened from $191.7 million, or 14 cents, in the year-earlier quarter. 

Analysts expected a fourth-quarter loss of 12 cents a share, according to a survey by FactSet.

Eric Sheridan of UBS said the earnings report “contained enough mixed messages to cause a negative reaction in the shares that seemed rational short-term,” according to Bloomberg.

Both revenue and user growth need to accelerate for the stock’s 13-month rally to continue, he said. On Dec. 21, 2018, Snap stock closed at $4.99 and through Tuesday had more than tripled.

But Sheridan does anticipate “strong performance in user growth/engagement, yield from platform investments and improved benefits of scale, pointing toward profitability.”

He has a buy rating and a $24 price target on Snap stock.

Ross Sandler of Barclays wrote in a report that the stock drop “isn’t surprising,” Bloomberg reports. 

But he also views it as a buying opportunity, as the company “is one of the few names with a strong possibility of accelerating growth and profit inflection in 2020.”

He rates the shares overweight and raised his price target raised to $23 from $22.

At last check, Snap shares traded at $17.02, down 10%.