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Analysts Say Snap's New Products Are a Canny Strategy, But Not a Total Fix

Analysts Say Snap's New Products Are a Canny Strategy, But Not a Total Fix

(Bloomberg) -- Snap Inc. rallied in early trading on Friday, one day after it hosted an event where it announced a suite of new products and services, including a video-game business. Analysts said the offerings should help drive engagement at the social-media company, even though they questioned how easily the offerings could be monetized.

The stock was up 4 percent and was on track for its highest close since August. While Snap remains down nearly 25 percent from a peak in April 2018, as of its Thursday close, the shares have surged about 135 percent off a December low.

Analysts Say Snap's New Products Are a Canny Strategy, But Not a Total Fix

Here’s what analysts are saying about the announcement:

Summit Insights Group, Jonathan Kees

“We are slightly encouraged by this potential improvement in execution with the new products and potential rise in engagement, as well as indications that SNAP is gaining with small advertisers from our checks.”

None of the products “will single handily move the needle,” but “engagement may tick up incrementally with gaming and APP stories may eventually become another source of additional revenues.”

Upgrades stock to hold from sell and doubles price target to $10.

Stifel, John Egbert

“The announcements highlight Snap’s continued ability to develop truly innovative experiences for its users.”

While competitors “are being pressured to reign in functionality due to privacy concerns, Snap’s privacy-centric approach could lead to developers investing more deeply in the platform.”

Affirms hold rating and $10 price target.

Deutsche Bank, Lloyd Walmsley

“More confident” in the social-media company’s outlook after the event.

Heard “a confident tone among Snap executives at the conference that we have not seen since before the IPO.” The firm has “increasing comfort” that changes to the company’s Android app can “improve performance and [daily active user] growth.”

Keeps hold rating but raises price target to $13 from $10.

Jefferies, Brent Thill

“These are the right steps to help drive user engagement and return to growth (after being flat sequentially).”

Despite the sharp gain in the stock this year, “work remains to get users back on the platform.” Affirms hold rating and $11 price target.

JMP Securities, Ronald Josey

“Encouraged” by the new offerings, as they highlight “Snap’s overall reach -- it now reaches 90 percent of 13-34 year olds -- and continued innovation in social, messaging, and [augmented reality].”

“Our checks suggest engagement is improving, which bodes well for advertising growth,” but “we think execution risk remains.”

Affirms market perform rating.


Morgan Stanley, Brian Nowak

The new services “should create engagement opportunities, but material monetization of this new engagement is not as straightforward.”

Affirms underweight rating “until we hear about stronger engagement/monetization of these products.”

Nomura Instinet, Mark Kelley

“We came away with a greater sense of the company’s efforts to improve engagement through new features and original programming and view the incremental revenue opportunities available through Audience Network video ads from Games as encouraging.”

Affirms neutral rating and $9 price target.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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