On Wednesday, BofA Securities revised its price target for Snap Inc (NYSE: NYSE:SNAP), increasing it to $14.00 from the previous $13.00, while keeping a Neutral stance on the stock.
The adjustment follows Snap's third-quarter results, which surpassed Wall Street's expectations with revenue and EBITDA coming in at $1,373 million and $132 million, respectively. This performance outdid the Street's projections of $1,358 million in revenue and $92 million in EBITDA.
Snap's advertising revenue saw a year-over-year increase of 9%, with Snapchat+ revenues surging 173%. The company's direct response (DR) revenue grew by 16% year-over-year, attributed to robust demand for its 7-0 Pixel Purchase optimization solutions, which saw an increase of over 160% in the third quarter.
Meanwhile, brand advertising revenue experienced a slight decline of 1% year-over-year. The growth in DR revenue was also supported by a growing contribution from App Purchase optimization.
The social media company successfully added 11 million daily active users (DAUs) quarter-over-quarter, reaching a total of 443 million, which was above the Street's estimate of 441 million. However, Snapchat+ subscriptions were slightly below expectations at 12 million, compared to the anticipated 12.4 million, and exhibited decelerating growth.
Looking ahead, Snap provided a fourth-quarter user guidance of 451 million DAUs, an increase of 8 million quarter-over-quarter, which is above the Street's forecast of 448 million. While Snap's revenue outlook for the fourth quarter has a midpoint below Street estimates, its EBITDA midpoint is projected to be higher, indicating a mixed but cautiously optimistic financial outlook for the end of the year.
In other recent news, Snap Inc. announced a share repurchase program valued at up to $500 million and introduced two new ad formats to attract large advertisers.
Analyst firm Evercore ISI raised Snap's price target to $15 from $12, maintaining an In-Line rating on the stock, while Benchmark reiterated a Hold rating citing concerns about average revenue per user growth. JMP Securities upgraded Snap from Market Perform to Market Outperform, highlighting upcoming product launches and advertising enhancements.
Snap has also been involved in efforts to enhance online safety for children, collaborating with U.S. and British authorities.
InvestingPro Insights
Snap Inc's recent performance and future outlook can be further contextualized with real-time data from InvestingPro. As of the latest quarter, Snap's revenue stood at $4.98 billion, with a notable year-over-year growth of 11.08%. This aligns with the company's reported advertising revenue increase and the surge in Snapchat+ revenues mentioned in the article.
InvestingPro Tips highlight that Snap operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as the company navigates its growth strategy. However, it's important to note that Snap is not currently profitable over the last twelve months, with an adjusted operating income of -$1.15 billion.
Despite the lack of profitability, analysts predict that Snap will become profitable this year, which could be a positive sign for investors considering the company's recent performance and user growth. The company's Price to Book ratio of 8.74 indicates that investors are willing to pay a premium for Snap's assets, possibly due to its growth potential in the social media and advertising space.
For readers interested in a deeper analysis, InvestingPro offers 5 additional tips that could provide further insights into Snap's financial health and market position.
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