Snap Stock: Brighter Days Ahead? GBH Insights Sets 1Q Expectations

GBH Insights' Daniel Ives says Snap's story all comes down to one word: monetization.


Snap Inc (NYSE:SNAP) is raring to release its first quarter print for the year as soon as the bell tolls, and Wall Street eyes will be peeled to see clues of triumph- or warning signs circling the buzzed-about app redesign.

GBH Insights analyst Daniel Ives sees this evening as a “key test” for the tech company to either earn “credibility” or stumble back, especially with this “app redesign front and center.”

That said, the analyst believes the redesign could help attract new users to its platform, making it less complex for older demographics, opening an advertising market opportunity here. Additionally, Ives spotlights robust secular to industry ad growth trends circling the mobile arena for the rest of the year- and all Snap must do is boost the monetization of its rising installed base through more content, partner initiatives, international growth prospects, and advertising. Though the Snapchat-app parent company confronts a battle being fought “uphill” in terms of DAU and growth, Ives wagers the back half of the year could prove promising thanks to new initiatives, including the self-serve platform that could yield dividends and growth stability.

For the first quarter, the Street angles for $244 million in total revenues from Snap and ($0.17) in EPS. Crucial attention will be paid to daily active users (DAU), with the Street forecasting 194 million for the quarter, translating to a net add of approximately 7 million.

Ultimately, “While this app redesign is the right move in our opinion, there has been clear backlash to this strategy […] among SNAP’s core user base over the last few months, which must be successfully hand held through this design change and evolution of the platform, otherwise it could backfire and alienate ‘power users’ of the platform thus remaining a clear risk on the story. To this point, SNAP clearly has ample challenges ahead and a lot of wood to chop on its platform as well as with investors to make sure this transition period and app overhaul leads to brighter days ahead for the rest of 2018 with tomorrow’s earnings a key data point for either the bulls or bears on the name. It all comes down to monetization in our opinion, and SNAP is going through a painful maturation phase to turn this one trick pony platform into a broader, ad centric consumer app that will enable SNAP to increase ARPU and DAU growth over the next 12 to 18 months, while also reaching its goal of profitability over the coming year,” Ives contends.

Ahead of tonight’s big earnings show, the analyst maintains a Highly Attractive rating on SNAP stock with a $24 price target, which implies a 67% upside from current levels. (To watch Ives’ track record, click here)

TipRanks indicates this millennial tech darling is still winning over Wall Street consensus opinion. Out of 24 analysts polled in the last 3 months, 6 are bullish on Snap stock, 11 remain sidelined, while 7 are bearish on the stock. With a return potential of nearly 10%, the stock’s consensus target price of $15.75 reveals positivity is baked into expectations.

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