Life’s just one big game. At least that’s how many tech companies are feeling right now.
Both Alphabet (GOOG) and Apple (AAPL) recently announced gaming platforms, and now it’s Snapchat-parent Snap’s (SNAP) turn. According to Cheddar, the company is expected to announce a new platform in April at its first “Snap Partner Summit” in LA. Meanwhile, SNAP’s main product — Snapchat — still struggles to live up to its IPO hype.
SNAP stock is down about 60% since going public in March 2017 but gained over 120% since late-2018, as the company has shown some promise, including continued rising revenue and better margins (though is still operating at a loss). However, Monness analyst Brian White believes the stock is not quite out of the woods as he reiterates a Neutral rating on SNAP (without suggesting a price target).
TipRanks mines historical data on individual analyst recommendations, aiming to enable investors to “instantly see the track record and measured performance of any analyst you come across online, so you know who to trust!” As it turns out, TipRanks is familiar with White’s record — and what it has to say about his score is encouraging. According to the rating platform, White has a yearly average return of 25% with a 75% success rate. White is ranked #19 out of 5,231 analysts. With that in mind, let’s go back to SNAP.
One major worry White has on Snap is its “inconsistent financial results.” But this fear is slightly mitigated by the company’s “unique platform, [which] remains innovative and enjoys a strong millennial following.” White also says, “Snap is pursuing a large market relative to its size,” including the digital advertising market which is expected to reach about $327 billion worldwide in 2019 (eMarketer).
While the huge market is cause for excitement, White believes “challenges at Snap have been driven by both increased competition from Facebook…and self-inflicted wounds.” The analyst says Snap was “negatively impacted by the app redesign fiasco, issues around the Android version of Snapchat and volatility in the executive ranks.” But concedes “the major issues of the app redesign at large appear to have passed and the company sounded more optimistic during its last earnings call around the work it is doing on improving the Android version of Snapchat.”
Facebook remains one of Snap’s largest challenge, however. The social network giant had attempted to acquire what was then Snapchat six years ago, to no avail. Instead it used its Instagram platform as a way to compete with Snapchat, including, most notably, Snapchat’s “stories” feature, which is now more widely-used on Instagram than on Snapchat.
All in all, many on Wall Street agree with White’s assessment of Snap. The company has a widely popular app, but hasn’t been able to convert it into dollars the way it would like. TipRanks analysis of 25 analysts shows a consensus Hold rating on the stock, with only four recommending Buy, 18 saying Hold and three selling. Notably, the average price target among these analysts is $9.10, representing an over 20% decrease from current levels. (See SNAP’s price targets and analyst ratings on TipRanks)