Market Overview

Aegis Initiates Coverage On SNAP, Sees Facebook Competition As Biggest Worry

Share:
Aegis Initiates Coverage On SNAP, Sees Facebook Competition As Biggest Worry

Victor Anthony of Aegis Capital started coverage of Snap Inc (NYSE: SNAP) with a price target of $22, and said the competition from Facebook Inc (NASDAQ: FB) could hurt the company’s prospects.

Snap, the parent company of Snapchat is planning to debut on the New York Stock Exchange on March 2, allows its users to use short-lived images and videos to communicate visually. Daily Active Users have grown to over 158 million, with the 18 and 24 age group representing majority of its user base. Over 2.5 billion Snaps are created every day.

That said, Anthony’s prime concern is competition with Facebook as core Facebook, Instagram, Messenger and WhatsApp have launched similar product features as Snap.

“This is a major terminal value risk and one we monitor closely as it could lead to Snap's core demo moving to Facebook's apps,” Anthony wrote in a note.

Related Link: Why Snap Will Be The Most Controversial Internet IPO This Year

Further, Snap faces the same issues as Twitter Inc (NYSE: TWTR) — slow user growth in some regions. The analyst pointed out Snap’s lack of an ecosystem as well as a lack of a clear path towards profitability.

On the advertising front, Anthony noted that Snap’s ad targeting capabilities are inferior to Facebook’s and Google's, and marketers cite analytics as a weakness relative to Facebook.

“[A] large percentage of advertisers view Snap as experimental spend – similar to Twitter at the time of its IPO,” Anthony continued.

That said, Anthony’s checks found that marketers are enthusiastic about the prospects of creating ads to get in front of Snap's coveted demographic base. As such, he sees Snap as a sustained ad share gainer over the next two years.

“That alone should be enough to lead to upside to the offering price range this year while management works to solve most of the above issues,” Anthony added.

Anthony sees revenues of $4.5 billion and adj. EBITDA of $850 million in 2020, for margins of 19 percent.

Latest Ratings for FB

DateFirmActionFromTo
Oct 2020Truist SecuritiesMaintainsBuy
Oct 2020Wells FargoMaintainsOverweight
Oct 2020MizuhoMaintainsBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

 

Related Articles (FB + SNAP)

View Comments and Join the Discussion!

Posted-In: Analyst Color News Price Target Initiation IPOs Analyst Ratings Tech Media Best of Benzinga

Latest Ratings

StockFirmActionPT
PMTB of A SecuritiesMaintains18.5
IVRB of A SecuritiesMaintains3.0
EFCB of A SecuritiesMaintains15.5
NYMTB of A SecuritiesMaintains3.5
NLYB of A SecuritiesMaintains8.5
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com