Citizens JMP analyst Andrew Boone has reduced the price target for Snap Inc. (SNAP, Financial) to $12 from the previous $14, while maintaining an Outperform rating on the stock. The adjustment comes as Snapchat faces hurdles in engaging users with its short-form video content, primarily due to structural constraints within the app and competition from other platforms.
The current iteration of Snapchat complicates quick access to features like Simple Snapchat and Spotlight, raising concerns about its capacity to hold user interest. With the ease of switching between different apps, Snapchat may struggle to keep its audience engaged with short-form videos.
The strategic options for Snapchat remain constrained. The platform can either persist with a focus on influencers, who are capable of posting content over 100 times daily, or stick to its current Discover tab. However, both approaches suggest that Snapchat might continue to lose its share of users' time.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 34 analysts, the average target price for Snap Inc (SNAP, Financial) is $11.40 with a high estimate of $16.00 and a low estimate of $7.40. The average target implies an upside of 36.81% from the current price of $8.33. More detailed estimate data can be found on the Snap Inc (SNAP) Forecast page.
Based on the consensus recommendation from 44 brokerage firms, Snap Inc's (SNAP, Financial) average brokerage recommendation is currently 2.9, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Snap Inc (SNAP, Financial) in one year is $14.08, suggesting a upside of 69.03% from the current price of $8.33. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Snap Inc (SNAP) Summary page.
SNAP Key Business Developments
Release Date: February 04, 2025
- Revenue: $1.56 billion in Q4, up 14% year-over-year.
- Advertising Revenue: $1.41 billion in Q4, up 10% year-over-year.
- Other Revenue: $143 million in Q4, driven by Snapchat+ subscriptions.
- Daily Active Users (DAU): 453 million in Q4, an increase of 39 million year-over-year.
- Adjusted EBITDA: $276 million in Q4, up from $159 million in the prior year.
- Net Income: $9 million in Q4, compared to a net loss of $248 million in the prior year.
- Free Cash Flow: $182 million in Q4.
- Full Year Revenue: $5.36 billion, up 16% year-over-year.
- Full Year Adjusted EBITDA: $509 million.
- Snapchat+ Subscribers: 14 million in Q4.
- Infrastructure Costs per DAU: $0.84 in Q4.
- Adjusted Gross Margin: 57% in Q4.
- Cash and Marketable Securities: $3.4 billion at the end of Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Snap Inc (SNAP, Financial) reported a 14% year-over-year increase in Q4 revenue, reaching $1.56 billion, driven by growth in direct response advertising and Snapchat Plus subscriptions.
- Daily active users grew to 453 million in Q4, marking an increase of 39 million year-over-year, with notable growth in the Rest of World segment.
- Snapchat Plus subscribers doubled from 7 million to 14 million in 2024, contributing significantly to revenue growth with a 131% year-over-year increase in other revenue.
- The company achieved $276 million in adjusted EBITDA for Q4, reflecting improved profitability and a 60% adjusted EBITDA flow-through.
- Snap Inc (SNAP) continues to innovate with new ad placements like sponsored Snaps and promoted places, which have shown promising early results in increasing advertiser reach.
Negative Points
- Brand-oriented advertising revenue declined by 1% year-over-year, indicating continued weakness among large clients, particularly in North America.
- The company faces challenges in migrating story ad demand to new formats, impacting engagement with certain user cohorts who prefer the traditional stories page.
- Infrastructure costs increased due to investments in machine learning and AI, with costs per daily active user remaining a concern.
- Legal costs, including litigation and regulatory compliance, are expected to rise, contributing to higher adjusted operating expenses.
- Despite growth in active advertisers, the ramp-up period for new advertisers to reach full revenue potential remains a challenge, impacting overall revenue growth.
