Analysts weighed in positively on targets from recent leaked memo and back-to-school ad trends
Snap Inc.’s stock was powering toward another session of strong gains Thursday in the wake of Chief Executive Evan Spiegel’s presentation at a conference as well as some upbeat analyst commentary about the social-media company’s internal targets and the state of the advertising market.
Shares SNAP, +9.34% were up 8.5% in Thursday afternoon trading, after rising 6.4% in Wednesday’s session.
Spiegel spoke late Wednesday at Vox’s Code conference, offering a frank view of Snap’s challenges but also discussing what he sees as big opportunity ahead of the company, which has seen its stock decline 74% so far in 2022.
“I believe we’re far from reaching our full potential,” Spiegel said in the presentation, according to a Wall Street Journal recap.
A Variety recap cited more positive commentary on the future of the business.
“Personally where I sit today and look at the long-term opportunity in our business, I really believe it’s enormous,” Spiegel said, according to that report.
At the same time, Spiegel was blunt about the current state of the market, per The Wall Street Journal.
“We don’t see a lot of things that make us optimistic and so what we’ve had to do is really restructure our business,” Spiegel said. Snap recently disclosed that it would be cutting 20% of jobs as it sought to give the business a sharper focus.
Shares of Snap closed higher on Wednesday after The Verge published a memo from Chief Executive Evan Spiegel, who told staffers that he was looking to boost the company’s user counts by 30% by the end of 2023.
He’s also targeting $6 billion in revenue by the end of next year, with $350 million of that potentially coming from the company’s Snapchat+ paid subscription service that lets users customize their app experiences, among other things.
A Snap spokesperson declined to comment on the memo.
KeyBanc Capital Markets analyst Justin Patterson said late Wednesday that he would “need to see more meaningful signs of revenue and audience growth to contemplate targets for $6B in revenue,” as well as upwards of $1.5 billion in adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda), a goal also set forth in the memo.
That said, Patterson was feeling a bit more upbeat about Snap’s story as he lifted his revenue expectations for 2022, 2023, and 2024. His 2023 estimate is now $5.6 billion, below Snap’s own objective.
“We believe back-to-school has gone better than expected, and that a more favorable supply environment is providing some relief to retail and e-commerce advertisers heading into 4Q,” he wrote.
Patterson said he was looking at the numbers in Spiegel’s memo more as an “internal goal vs. formal guidance.”
UBS’s Lloyd Walmsley sounded more optimistic, writing that he was “encouraged” to see what Spiegel outlined in the note.
“We recognize this could be an internal stretch goal and the co is in a show-me mode given macro uncertainty,” Walmsley wrote. “Nonetheless, we think the co has done a good job executing, showing DAU [daily active user] growth of 85% since ’18 to date and growing revenue 3x from ’18 through ’22E.”
He added that he was willing to give Snap’s management team “the benefit of the doubt” despite economic uncertainty.
Snap’s stock has lost 18.1% over the past three months, while the S&P 500 index SPX, +0.66% has eased 3.0%.