Shares of Snap Inc SNAP, which have declined steadily since the company went public in March 2017, could find support from recent management changes and improved execution, according to Wedbush.
Snap's decelerating growth trends, fierce competition for user mindshare and ad dollars and history of being hugely unprofitable have kept Wedbush on the sidelines, Pachter said in a Tuesday note. (See his track record here.)
Stock compensation as a percentage of revenue, at 70 percent, as well as continuing free cash flow burn acted as deterrents, the analyst said.
With new management in place, the company has the opportunity to significantly improve its execution, Pachter said.
Tim Stone was hired as CFO in May and fully transitioned into the role by mid-August, the analyst said. On Monday, the company announced the departure of Chief Strategy Officer Imran Khan.
"The departure of Mr. Khan makes Mr. Stone both more visible and more vital in our view, and gives us confidence that corporate governance will improve and have a measurable impact on the development of and articulation of the company's strategy," Pachter said.
Snap's valuation leaves room for upside due to multiple expansion and potentially accelerated progress toward profitability, according to Wedbush.
The Price Action
Snap shares have shed about 33 percent year-to-date.
The stock was trading up 2.25 percent to $9.96 at the time of publication Tuesday.
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