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Snap's Stock Rips Higher By 30%: Here's What The Street Thinks

April 22, 2020 2:30 pm
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Snap's Stock Rips Higher By 30%: Here's What The Street Thinks

Snap Inc (NYSE:SNAP) reported better-than-expected first-quarter results, highlighted by a 44% year-over-year increase in revenue and a 20% growth in daily active users.

Here is a summary of how some of the Street's top analysts reacted to the print.

The Snap Analysts

Credit Suisse analyst Stephen Ju maintains an Outperform rating on Snap's stock with a price target lowered from $20 to $18.

Needham's Laura Martin maintains at Hold.

RBC Capital's Mark Mahaney maintains at Outperform, price target lifted from $18 to $21.

Wedbush's Michael Pachter maintains at Neutral, price target lowered from $15.25 to $12.25.

Credit Suisse: Q1 Performance

Snap reported first-quarter revenue of $462.5 million versus expectations of $452.6 million, while adjusted EBITDA of $(81.2 million) was better than the $(86.3 million) expected. Net adds for Daily Active Users (DAUs) in North America rose by 2 million versus expectations of 1.1 million, while Europe also outperformed at 3 million versus 2.3 million.

Snap's management noted  January and February revenue growth accelerated versus fourth-quarter results as the Snapchat platform evolved to become an "always-on channel" for new advertisers, the analyst wrote in a note. This solidifies the bullish stance that Snap's turnaround process is real.

Related Link: Snap Reports Big Q1 Sales Beat, DAUs Up 20%

Needham: 6 Key Take-Aways

Snap's stock surge is "well-deserved" for a few key reasons, Martin wrote in a note:

  • Revenue rose 44% despite 25% of digital ad categories (like hotels and film marketing) stopped advertising.
  • Snap is being viewed less as an "experimental" venue for advertisers and more of a "core ad partner."
  • Free cash flow of negative $5 million marks a "dramatic" improvement while Adjusted EBITDA margin improved "strongly" from negative 39% in the prior year to 18%.
  • Impressions nearly doubled in the quarter while average revenue per user rose 20% from last year to $2.02.

Instinet: Better-Than-Feared

Snap's report came in better than expected at the midpoint of management's guidance and "far better" than the consensus estimates, Kelley said. Management's priorities remain on track and this was evident in key metrics like DR growth.

"We believe this print will check a lot of boxes for those who are already long SNAP and offer some comfort to those exposed to some of the other digital advertising names," the analyst wrote in a note.

RBC: Resiliency

Snap's report signals the company is "more resilient" compared to other internet advertising beneficiaries for three reasons, Mahaney wrote in a note. These include:

  • A 50%-plus DR exposure.
  • Skew to several resilient verticals.
  • Strong exposure to young and digitally-native people, which is attractive to advertisers trying to reach this group during the stay-at-home orders.

Wedbush: Minimal Near-Term Outlook

Snap's management offered "limited" near-term guidance due to macroeconomic uncertainties, Pachter said. Specifically, management shied away from any formal guidance related to revenue and EBITDA for the second quarter.

The company expects second quarter DAU to be 239 million and a combination of cost of goods sold (COGS) and operating expenses will grow roughly at the same rate as the first quarter, the analyst said.

Price Action

Shares of Snap were trading higher by more than 30% at $16.39 at time of publication.

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