Snap Inc. (NYSE: SNAP) shares skyrocketed 30% on Friday, March 10, 2023, after the company released its first-quarter financial results, which surpassed market expectations.
The parent company of the popular social media platform Snapchat reported a 10% year-over-year increase in daily active users, reaching 422 million in the first quarter. This growth was accompanied by a significant surge in Snapchat+ subscribers, which more than tripled during the same period.
Snap’s revenue also experienced a substantial increase, rising by over 20% year-over-year to $1 billion. This positive financial performance prompted several bullish analysts to raise their price targets for the stock, with some projecting a further upside potential of up to $19 per share.
Jefferies analyst James Heaney expressed optimism about Snap’s future prospects, stating in a note to investors, “We were impressed by the broad-based strength of the business.” He anticipates that the company’s positive momentum will continue in the second quarter, driven by growth in advertising revenue.
Meanwhile, other analysts speculate that a potential ban on TikTok, a rival social media platform, could provide additional tailwinds for Snapchat. However, it is important to note that Snap remains an unprofitable company. While its losses have decreased, they still exceeded $300 million during the three months ended March 31, 2023.
The company’s stock price, which reached a high of approximately $80 in late 2021, remains significantly below those levels. This volatility has led some Wall Street analysts to be more cautious in their outlook for Snap’s continued growth at its current pace.
Doug Anmuth of JPMorgan maintained his recommendation for investors to sell Snap stock, based on his belief that the company will experience a slowdown in the second quarter. Despite raising his price target for Snap shares from $11 to $13, he cautioned, “Snap’s results have historically been choppy, and we are hesitant to extrapolate from one quarter of strong results.”
Analysts at Bank of America also expressed skepticism, assigning the stock a neutral rating due to the company’s ongoing challenges in monetizing its platform and its relatively flat user growth.
Despite these concerns, Snap’s recent financial performance has provided some reassurance to investors, and the stock’s surge on Friday suggests that many remain optimistic about its long-term potential.
