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Stifel Initiates Snap Inc At Hold

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Stifel Initiates Snap Inc At Hold

Despite the recent uptick in sentiment toward Snap Inc (NYSE: SNAP), sell-side hasn't been completely sold on the company.

Monday, Stifel initiated the ephemeral photo and video sharing company at a Hold. The firm has a $24 price target for the shares, suggesting roughly 5.5 percent upside from last Friday's closing price.

Meanwhile, earlier today, JMP Securities initiated coverage of the company with a Market Outperform rating and a price target of $28. However, Citi and Cowen were more upbeat, with the former initiating Snap at a Buy and with a $27 price target, while the latter started the company at Outperform, with a $26 price target.

User Statistics

Giving the user statistics, Stifel noted that Snap had global daily average users, or DAUs, of 158 million as of the fourth quarter of 2016, with an average user spending 25 to 30 minutes per day using Snapchat service. Snap monetizes engagement through branded video, filter and augmented reality ad products, the firm noted.

Stifel Approves Snap's Ambitions

Analysts Scott Devitt, John Egbert and Logan Thomas said they approve of Snap's product strategy, which is offering users the most highly engaging and innovative products, and business strategy of acquiring and retaining users in the most valuable ad markets.

Stock Reflects Long-Term Growth Prospects

"As of 4Q:16, Snap monetized its growing U.S. user base at $6.66 per user per year compared to Twitter at $50.18 and Facebook at $80.79. That is to say, Snap is just at the beginning of a long monetization road," Stifel noted.

However, the firm's muted opinion is due to the fact that at current valuation, Snap's stock appears to reflect its optimism in the company's long-term growth prospects.

Short-Term/Long-Term Prospects

"We would view Snap's risk/reward as more compelling in the short term if shares were to fall to $20, or if Snap materially tops consensus forecasts when it reports 1Q:17 results," Stifel said.

"Longer term, we believe Snap is in rare company among publicly-traded technology stocks as a $10 billion + market cap company with the potential to deliver multi-bagger returns over the next several years if the company continues to execute toward its vision."

Stifel's Expectations For Snap

  • Revenues 99 percent, plus, over the long-term to attain $3 billion revenues in 2019, helped by increased monetization through Snap ad products, high user engagement and a broadening user base.
  • DAUs to reach over 280 million in 2020, with 110 million DAUs in North America.
  • Reach break-even in 2019 and generate material profits in 2020 and beyond, as it scales its ad business.
  • Margin expansion due to leverage in Snap's cloud-hosting costs and the increased adoption of its automated ad sales.
  • Long-term EBITDA margins of 45 percent, within 10-15 percent of peers such as Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL).

At the time of writing, Snap shares were rallying 4.79 percent at $23.83.

Related Links:

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Posted-In: Citi Cowen JMP SecuritiesAnalyst Color Initiation Analyst Ratings Tech Media

 

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