Snap stock extends rally as CEO calls for ‘huge’ opportunity

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Snap Inc.’s stock led to another strong earnings session on Thursday, following CEO Evan Spiegel’s conference call as well as some upbeat comments from analysts about the social media company’s internal goals and the state of the advertising market.

SNAP shares,
+9.34%
rose 8.5% in afternoon trading Thursday, after rising 6.4% in Wednesday’s session.

Spiegel spoke late Wednesday at Vox’s Code conference, offering a candid look at Snap’s challenges, but also discussing what he sees as a big opportunity ahead for the company, which has seen its stock down 74% so far in 2022.

“I think we’re a long way from reaching our full potential,” Spiegel said at the presentation, according to a Wall Street Journal recap.

A Variety recap reported more positive comments about the future of the business.

“Personally where I sit today and look at the long-term opportunity in our business, I really think it’s huge,” Spiegel said, according to that report.

At the same time, Spiegel was blunt about the current state of the market, according to the Wall Street Journal.

“We don’t see a lot of things that make us optimistic, so what we’ve had to do is really restructure our business,” Spiegel said. Snap recently revealed it would cut 20% of its jobs as it tried to give the business a sharper focus.

See More: Snap Confirms Huge Job Cuts, Reveals Unexpected Sales Growth

Snap shares closed higher on Wednesday after The Verge published a memo from CEO Evan Spiegel, who told employees he was looking to grow the company’s user base by 30% by the end of 2023.

It’s also targeting $6 billion in revenue by the end of next year, with $350 million of that potentially coming from the company’s Snapchat+ paid subscription service that lets users customize their app experiences, among other things.

Read: Snap just hit a milestone as it looks to surpass ad revenue

A spokesperson for Snap declined to comment on the memo.

KeyBanc Capital Markets analyst Justin Patterson said late Wednesday that he “will need to see more meaningful signs of revenue and audience growth to consider targets for $6 billion in revenue,” as well as adjusted earnings of more than $1.5 billion before from interest, taxes and depreciation, and amortization (Ebitda), a target also set out in the note.

That said, Patterson was a bit more bullish on Snap’s story as he raised his revenue expectations for 2022, 2023 and 2024. His 2023 estimate is now $5.6 billion, below the target of Snap itself.

“We believe that back-to-school has gone better than expected and that a more favorable bidding environment provides some relief for retail and e-commerce advertisers heading into Q4,” he wrote.

Patterson said he saw the numbers in Spiegel’s memo more as “an internal target versus official guidance.”

UBS’s Lloyd Walmsley sounded more optimistic, writing that he was “encouraged” to see what Spiegel described in the memo.

“We recognize that this could be an internal target and the partnership is in demonstration mode given the macroeconomic uncertainty,” Walmsley wrote. “However, we think the partner did a good job of executing, showing the DAU [daily active user] 85% growth from ’18 to date and 3x revenue growth from ’18 to ’22E.

He added that he was willing to give Snap’s management team “the benefit of the doubt” despite the financial uncertainty.

Snap stock has lost 18.1% over the past three months, while the S&P 500 SPX,
+0.66%
is down 3.0%.

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