Snap Inc. (SNAP) shares experienced a significant climb on Wednesday following the company’s release of upbeat third-quarter earnings. The results, reported amidst a bustling earnings season, showcased a positive performance for the social media giant. Several analysts weighed in on the key takeaways from Snap’s report, shedding light on the factors driving the stock’s surge and the company’s future outlook.
Key Analyst Takeaways
Deepak Mathivanan, an analyst at maintained a Neutral rating on Snap while raising the price target from $8 to $9. He attributed the positive adjusted EBITDA to improved cost management. Mathivanan also noted that Snap’s fourth-quarter guidance was better than anticipated. He highlighted that while initial testing of the simplified ‘Simple Snapchat’ app demonstrated encouraging results in select markets, and new direct response (DR) products showed promise, the company’s revenue growth remains hindered by challenges in the brand business.
Naved Khan, an analyst at , reiterated a Neutral rating while also increasing the price target from $11 to $12. He pointed out that Snap’s third-quarter revenues and adjusted EBITDA surpassed consensus estimates, with brand revenues showing weakness. Khan highlighted that DR ad revenue benefited from increased adoption by small and medium businesses (SMBs), leading to a 16% year-over-year growth. He expressed caution regarding Snap’s fourth-quarter guidance, citing potential disruptions from the ‘Simple Snapchat’ rollout and exposure to upper-funnel ad spend during a seasonally strong quarter.
Andrew Boone, an analyst at , reaffirmed a Market Outperform rating but lowered the price target from $17 to $16. Boone acknowledged that Snap’s third-quarter results were in line with expectations, with a slight revenue beat and EBITDA exceeding consensus. He noted that the high end of the fourth-quarter revenue guidance met consensus. Boone highlighted Snap’s plans to aggressively test Sponsored Snaps in the fourth quarter and the consistent DR growth, despite challenging comparisons. He further observed that ‘Simple Snapchat’ is driving engagement for less engaged users, but iOS users might see less benefit.
Justin Post, an analyst at , maintained a Neutral rating while lifting the price target from $13 to $14. Post attributed DR growth to strong demand for 7-0 Pixel Purchase optimization solutions and increased contributions from App Purchase optimization. He highlighted Snap’s addition of 11 million daily active users (DAUs), reaching a total of 443 million. Post noted that Snapchat+ subscribers reached 12 million, slightly below market expectations, with decelerated growth. He acknowledged that Snap exceeded third-quarter expectations due to improved cost management but emphasized that challenges persist.
Thomas Champion, an analyst at , reiterated a Neutral rating while raising the price target from $12 to $13. Champion highlighted that North America performance fell short of expectations, while Europe, the Middle East, and Rest of World (EU/ROW) exceeded expectations. He pointed out that approximately 10 million users are testing the simplified Snapchat app, with a focus on lower monetizing geographies. He also commented on the mixed margin picture with cost of goods sold (COGS) reaching a $2.6 billion run rate.
Youssef Squali, an analyst at , maintained a Hold rating while raising the price target from $13 to $14. Squali observed that Snap’s third-quarter results and fourth-quarter guidance reflected strong traction in DR and Snapchat+ offset by weakness in brand advertising. He highlighted the improvement in margins, suggesting that changes to ad products are resonating with advertisers, particularly SMBs. However, he noted that execution remains inconsistent. Squali emphasized that with flat DAUs in the US and weaker brand spending in North America, the region with the highest monetization, Snap continues to lose market share in the digital advertising landscape.
Eric Sheridan, an analyst at , reiterated a Neutral rating while raising the price target from $12 to $13.50. Sheridan noted that Snap’s quarterly revenues were modestly higher than expectations, with DR initiatives and revenue from Snapchat+ outweighing lingering brand advertising headwinds. He commended Snap’s solid performance on gross margins and adjusted EBITDA, attributed to lower infrastructure costs per DAU and continued discipline in operating expenditure. However, Sheridan highlighted that management indicated a continued commitment to investing in long-term growth initiatives such as artificial intelligence (AI)/machine learning (ML), product development, and partner content costs.
Brad Erickson, an analyst at , maintained a Sector Perform rating and a price target of $16. Erickson emphasized the strong performance of DR growth, partly driven by Snap’s 7-0 attribution/optimization solution. He highlighted the importance of Snap’s improved optimization tools in demonstrating higher value for SMBs. Erickson noted that the ‘Simple Snap’ app redesign and new ad units, including Sponsored Snaps and Promoted Places, are being tested, with a full rollout anticipated early in 2025. He expressed a bullish sentiment about the company’s ability to create incremental reach for advertisers. He further suggested that the potential ban of TikTok in 2025 could present an opportunity for Snap.
Brian Pitz, an analyst at , reaffirmed an Outperform rating and a price target of $18. Pitz attributed the growth in DR budgets to a simplified advertiser user interface and increased time spent on the platform. He highlighted the positive impact of stabilization in North American engagement in the third quarter as Snap prepares to roll out ‘Simple Snap’ in the first half of 2025. He expressed confidence that ‘Simple Snapchat’ will positively impact monetization for Snap’s growing monthly active users (MAUs), which are approaching 1 billion. Pitz noted that Spotlight ended the quarter with 500 million MAUs, representing a 21% year-over-year increase.
Rohit Kulkarni, an analyst at , reiterated a Neutral rating and a price target of $14. Kulkarni attributed the rise in Snap shares to the company’s small topline beat and significant EBITDA beat, although the fourth-quarter outlook was in line or below expectations. He expressed cautious optimism about Snap’s progress in attracting SMB advertisers and growing its DR business. However, he expressed concerns about Snap’s ability to consistently grow brand revenue over multiple quarters.
Mark Zgutowicz, an analyst at , maintained a Hold rating on the stock. Zgutowicz viewed Snap’s quarterly results as a calming factor for the stock following volatility in the second quarter. He highlighted the company’s focus on expense management and SMB penetration, leveraging initial audience engagement products like Snap Promote, with testing underway for Sponsored Snaps and Promoted Places. He acknowledged that revenue generated by Snap’s large brand clients remains challenged, particularly in the North American segment. He further stated that the weakening trend in brand spending could persist in the fourth quarter and into the first half of 2025.
Jason Helfstein, an analyst at , reiterated a Perform rating on the stock. Helfstein attributed the more than 10% surge in Snap shares after hours to improved margin and cost outlook despite lackluster US ad revenue growth. He highlighted the challenging decision facing management between ramping up investments to keep pace with competitors and pursuing margin expansion.
SNAP Price Action: Snap shares had risen by 16.99% to $12.74 at the time of publication on Wednesday.
