Aegis Still Cautious on Snap Inc (SNAP), But Rooting for eBay Inc (EBAY) Ahead of 2Q Print


Snap’s Overrated Hopes for Sunglasses

Snap Inc (NYSE:SNAP) may have thought its sunglasses would be profit-makers and not just a publicity shot at 10 seconds of fame, but Aegis analyst Victor Anthony is putting the popular Snapchat app parent company’s Spectacles in the bin along with Alphabet’s Google Glass after spotting less-than-stellar June usage trends. In other words, Anthony votes Spectacles sales do not look healthy, and between sluggish trends and weak sales, these two weights could very well put projections under some strain.

As such, the analyst reiterates a Hold rating on shares of SNAP with a $19 price target, which represents a 6% increase from where the stock is currently trading. (To watch Anthony’s track record click here.)

However, not all looks dim for the company, as the analyst underscores, ” […] On a positive note, we understand that recent product updates are resonating with users, particularly, the Maps and World Lenses features, and that could help with engagement in 3Q17 and beyond.”

After polling several millennials, Snap’s biggest champion in the market, regarding Spectacles, the analyst enters forth with a couple key highlights: “Our sample was small and not statistically significant, but was quite telling. Could be that the hype around the Spectacles has faded and it could suffer the same fate as Google Glass. The key difference is that Google Glass was immaterial to Google’s financials, whereas, we estimate that Spectacles represented a mid-single digit percent of Snap’s 1Q17 revenues. Hence, lackluster sales could exert downward pressure on revenue estimates.”

Additionally, with the advantage of favorable reception for launches like Maps and World Lenses, “The positive for Snap is that existing users are spending more time with the app, which should, at some point in the future, help drive advertising revenue growth,” notes the analyst.

Overall, Anthony surmises sidelined on the following crucial four points of apprehension: “1) the lock-up expiration; 2) user growth; 3) a lukewarm advertiser reception; and 4) competition with Instagram, which we see as Snap’s primary competitor.”

TipRanks analytics indicate SNAP as a Hold. Out of 29 analysts polled by TipRanks in the last 3 months, 11 are bullish on Snap stock, 14 remain sidelined, and 4 are bearish on the stock. With a return potential of 32%, the stock’s consensus target price stands at $21.17.

eBay Poised to Reap Advantage from Amazon’s Prime Day

With eBay Inc (NASDAQ:EBAY) is set to deliver its second quarter print of the year July 20th after the bell, and Anthony is setting bullish expectations for the online auction giant. Assessing shares to be “attractive,” monthly active user and daily active user growth to be on a steady rise, and good tidings to be in store from Amazon’s Prime Day, the analyst reiterates a Buy rating on eBay with a price target of $42, which represents a 19% increase from current levels.

For second quarter financial earnings, the analyst forecasts the giant to bring in $2.328 billion in revenue and $0.45 in non-GAAP EPS. Additionally, the analyst indicates, “Final app traffic data showed solid MAU/DAUs for core eBay in 2Q17, suggesting that GMV growth likely accelerated – we model FXNeutral GMV growth of 5%, in-line with 1Q17. [Mobile GMV is ~50% of total GMV.] We have argued that for the stock to breakout of the current range, 2H17/2018 GMV/Revenue growth will have to accelerate. 2Q results are likely to show that eBay is on its way to achieve that.”

“Separately, we believe eBay should benefit from Amazon’s Prime Day. While eBay has not quantified the impact of Amazon’s Prime Day on their prior year’s results, they stated this on the 2Q16 earnings call: ‘With regard to Prime day, look, I don’t want to really get into it other than saying Prime day was a really good day for us. It was a really strong day of growth for us.’ We expect better results for eBay this year given that eBay’s Deal’s page is being widely promoted on the website and on the app, and includes a heavily discounted deal for Google Home, all to capitalize on Prime Day.”

TipRanks analytics show EBAY as a Buy. Based on 16 analysts polled by TipRanks in the last 3 months, 8 rate a Buy on eBay stock while 8 maintain a Hold. The 12-month average price target stands at $37.77, marking a nearly 7% upside from where the stock is currently trading.