Top analyst Youssef Squali at SunTrust continues to play it safe on Snap Inc (NYSE:SNAP) ahead of tomorrow’s first quarter earnings show- but that does not mean he is not angling for positive results. In fact, the analyst believes that digital ad platform giants’ results from the week before point to a more robust marketer’s demand for digital ad inventory than expected in the first quartet. To put it bluntly, this “bodes well for Snap,” bets squali.
For now, the analyst reiterates a Hold rating on SNAP stock with a $15 price target, which implies a 5% upside from current levels.
Ahead of the first quarter print, the analyst is just above the Street on revenue, angling for $256 million against the Street’s $243 million. For adjusted EBITDA, the analyst expects Snap to hit ($213 million) against the Street’s ($200 million).
Squali divvies up his key insights on this millennial tech court: “1) valuation remains full at 13.1x EV/FY18 Revenue, the high-end of our IDM group, 2) read through from GOOGL, TWTR, FB and AMZN’s results bode well for SNAP, our ests. are ahead of consensus; 3) feedback from marketers remains cautiously optimistic; 4) on-going changes to the app re-design create potential for higher volatility; 5) lack of mgt guidance causes more variability to consensus estimates. We believe Snap remains very innovative, creating product features that highly engages the hard-to-reach but highly desirable 18-34 year-old demo.”
Overall, “We believe there is upside to bottom line estimates considering the three rounds of layoffs the company went through this year, and CEO Spiegel’s reported […] goal of turning the company break-even by the end of the year. This is a tall order, in our view considering the current consensus estimate stand at ($638M) for adj. EBITDA,” concludes the analyst, who remains sidelined on a management vision that holds promise, but “is still a work-in-progress.”
Youssef Squali has a very good TipRanks score with a 70% success rate and a high ranking of #55 out of 4,775 analysts. Squali yields 19.8% in his annual returns. However, when recommending SNAP stock, Squali forfeits 5.2% in average profits on the stock.
Though this tech player has captivated massive millennial interest, Wall Street still needs some more convincing, according to TipRanks analytics. 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’s prospects. Yet, optimism appears to be baked into these analysts’ expectations. Consider that the 12-month average price target of $15.75 reflects a healthy upside potential of 10% from where the stock is currently trading.