Wall Street Analysts: Why Snap Inc (SNAP) Stock Should Have Been a Sell, Tesla Inc (TSLA) Is Untouchable in Branding and Performance

BTIG: SNAP's usage is not where troubles lie; Piper Jaffray: TSLA not about to be beat by China in EV arena.


Snap Was Better for the Bears the Past Six Months

BTIG analyst Richard Greenfield first initiated coverage on Snap Inc (NYSE:SNAP) over half a year ago, and in these six months, the man who surveyed the popular Snapchat app parent company from the sidelines has seen shares wind down 28%. The verdict here? To not have been bearish on Snap from the start was off-target.

“Why we have been wrong on Snapchat,” Greenfield asserts, cheekily noting: “#wearesorry.” Though the analyst is not budging from his rating, he is taking estimates down “materially” after six months of witnessing the social media platform underclass expectations, with a big finger pointed at international daily active users.

As such, the analyst reiterates a Neutral rating on SNAP stock without listing a price target. (To watch Greenfield’s track record, click here)

Greenfield explains, “With so little monetization history under its belt, the lack of clarity around the impact of competitive products (meaning Facebook/Instagram) and no clarity on the product innovation timetable, we believe a Neutral rating is warranted at current levels.”

In fact, this is “not a DAU/engagement issue,” as the analyst writes: “With the stock down 28% in the past six months since our initiation at Neutral, we were wrong to not have a SELL rating. […] Snapchat usage is not the problem, with the company exceeding our user growth expectations domestically (overseas DAUs are insignificantly underperforming our expectations).”

On a positive note, the analyst concludes that Snap is an enticing fighter despite a cutthroat playing field: “While we believe Instagram stories has clearly hurt Snapchat, in terms of users and time spent, Snapchat’s ability to grow in the face of rising competition illustrates how important the service is to its user base and how the company has provided existing users with more to do to increase engagement (messaging services are very sticky).”

Most of Wall Street is in a toss-up on this popular tech stock, as TipRanks analytics showcase SNAP as a Hold. Out of 27 analysts polled by TipRanks in the last 3 months, 8 are bullish on Snap stock, 14 remain sidelined, and 5 are bearish on the stock. With a loss potential of 6%, the stock’s consensus target price stands at $15.07.

Tesla Has No Equal- Least of All in China

Good luck to Chinese brands who believe they stand to compete with Tesla Inc (NASDAQ:TSLA), says Piper Jaffray analyst Alexander Potter, who on the heels of meeting with an electric vehicle (EV) trade group this week in Beijing, China sees “little to fear” for the electric gar giant’s investors.

Taking under account the competitive sphere of EVs, as far as Potter is concerned, Chinese vehicles simply are not up to par on the playing field of Tesla’s stellar legacy of branding and performance: “Anyone who has taken a ride in a Chinese EV will tell you that, like most other Chinese sedans, these vehicles just aren’t compelling consumer products.” In other words, “nobody (least of all Chinese OEMs) can compete with Tesla,” argues the analyst, a true-blue Tesla bull.

Following the EV trade group meeting, the analyst maintains an Overweight rating on TSLA stock with a price target of $386, which implies a just under 9% increase from where the shares last closed.

Potter asserts, “Branding and performance are just as important, and in this regard, we think nobody (least of all Chinese OEMs) can compete with TSLA.”

Two years from now, China has plans to rev up an electric vehicle quota system, where mighty auto makers will have to buy EV credits for 10% of total deliveries in 2019, stepping up to 12% by the year 2020. The objective will be to sell 7 million new EVs within the next 8 years. The analyst notes, “Companies that fail to achieve the quotas will be able to buy credits from companies that exceed the quotas.”

Ultimately, “We think Tesla is still the only EV company that can compete without policy support. It would be naïve to claim that TSLA doesn’t benefit from pro-EV policies,” contends Potter, who makes a point to mention Beijing as an example where “purchase restrictions make it all but impossible to buy internal combustion cars.”

For this reason, CEO Elon Musk’s brainchild that produce zero-emission vehicles have experienced such a snowball effect. Taking this policy support off the table will not “doom” Tesla’s prospects down the road, yet other EV producers are not in the same solid standing in this sphere.

“It’s true that more capable competitors will enter the fray in the coming years – and time will tell if their EVs can inspire consumer demand – but with Tesla, we think this is a non-issue,” surmises Potter, unfazed on Tesla’s promising future ahead.

Not everyone on the Street trumpets such a bullish forecast on this electric giant as does Potter, considering TipRanks analytics exhibit TSLA as a Hold. Based on 21 analysts polled by TipRanks in the last 3 months, 6 rate a Buy on Tesla stock, 7 maintain a Hold, while 8 issue a Sell on the stock. The 12-month average price target stands at $324.07, marking a nearly 9% downside from where the stock is currently trading.

  • Hung Nguyen

    SNAP is for the future. It will be up and down for a couple years, but it will make it. When Facebook was at $24 per share, I thought they would not make it, but they did.