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The Snap Bear Filter: Wedbush Projects Below-Consensus Q4

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The Snap Bear Filter: Wedbush Projects Below-Consensus Q4
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Snapchat parent Snap Inc (NYSE: SNAP)'s shares have been on a lean run ever since the company's March 2017 IPO. The company is scheduled to release fiscal year fourth-quarter results after the close Tuesday, Feb. 6.

The Analyst

Wedbush analyst Michael Pachter maintained a Neutral rating and $9 price target on the shares of the company, suggesting 35-percent downside from current levels.

The Thesis

Decelerating growth trends, fierce competition for mindshare and ad dollars and a history of being hugely unprofitable keep Wedbush on the sidelines, Pachter said in a Friday note.

Wedbush estimates a loss of 18 cents per share on revenue of $238 million for the quarter. This compares to Street forecasts that call for a loss of 16 cents per share on revenues of $253 million.

The estimates are premised on total sequential daily average user growth of 7 million, translating to worldwide average DAUs of 185 million at the end of the fourth quarter, Pachter said.

Total average revenue per user, or ARPU, is estimated at $1.28 compared to $1.05 in the year-ago quarter and $1.17 in the prior quarter.

Although innovation could drive sustained growth in engagement metrics and overall impressions, Pachter said the simultaneous and ongoing mix shift toward programmatic placements will hurt ad pricing, which declined by 60 percent year-over-year in Snap's third quarter.

Wedbush projects user growth will remain modest in the fourth quarter and for the foreseeable future, given its already-high penetration among 13-34-year-olds, high data loads and Snap's development focus on the iOS platform — which limits international adoption, he said. 

"Despite improvements, Snap's ad product offerings still appear immature relative to competitors, and higher efficiency in the ad auction remains unlikely to induce incremental spending from large advertisers," Pachter said. 

The Price Action

Since the March 2, 2017 IPO, Snap shares have lost about 43 percent.

In pre-market trading, the shares were down 1.15 percent at $13.76.

Related Links:

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Latest Ratings for SNAP

DateFirmActionFromTo
Dec 2018GuggenheimInitiates Coverage OnNeutral
Oct 2018JefferiesMaintainsHoldHold
Oct 2018Canaccord GenuityMaintainsHoldHold

View More Analyst Ratings for SNAP
View the Latest Analyst Ratings

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