Market Overview

Mizuho Initiates Snap With Mixed Feelings

Share:
Mizuho Initiates Snap With Mixed Feelings

The reserved sell-side reaction to newly IPO-ed Snap Inc (NYSE: SNAP) continued Friday with an initiation from Mizuho. The firm started Snap with a Neutral rating and $20 price target.

A survey of more than 1,000 Snap users by Mizuho found that 79 percent open the app more than twice a day. Twenty-one percent use Snap more than 15 times a day, an engagement level analysts Neil Doshi and San Q. Phan said is “quite astonishing.”

Sixty-four percent of those avid users, though, said they “hardly ever” click on an ad in Snap, according to Mizuho — demonstrating the hill Snap has to climb.

“In our view, Snap will need to materially improve its advertising targeting and ad quality to increase ad loads without diminishing the user experience,” Doshi and Phan said.

Snap, which has approximately 158 million daily users, was priced at $17 in its March 1 initial public offering.

The Mizuho analysts projected Snap will generate positive operating income by 2020.

User Growth, Revenue Needed

Revenue projections for Snap are sensitive to shifts in user growth and average revenue per user, or ARPU, Doshi and Phan said.

A 1 percent change in the four-year compound annual growth rate, or CAGR, of Snap’s daily active users and a $1 change in Mizuho’s projected ARPU for Snap would drive a $430 million change in Snap’s revenue based on the analyst firm’s model.

“We conclude that if Snap cannot grow its user base from current levels, it will need to grow its ARPU to near-Facebook levels in order to meet our revenue expectations in 2020, which we believe could be a considerable challenge,” the Mizuho analysts said.

Latest Ratings for SNAP

DateFirmActionFromTo
Oct 2019Initiates Coverage OnNeutral
Oct 2019UpgradesNeutralBuy
Oct 2019UpgradesNeutralBuy

View More Analyst Ratings for SNAP
View the Latest Analyst Ratings

Posted-In: mizuho Neil Doshi SNAPAnalyst Color Price Target Initiation Analyst Ratings Tech Best of Benzinga

 

Related Articles (SNAP)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ELMDDougherty & Co.Initiates Coverage On12.0
MRNSCantor FitzgeraldAssumes7.0
MNRLCapital One FinancialInitiates Coverage On23.0
SONVertical GroupUpgrades
UNPMorgan StanleyMaintains136.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
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.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
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

Why Republicans May Put The Border Wall Debate On Hold For Now

Alibaba's Under-The-Radar Technical Breakout