Why Yelp Was Upgraded and Snap Was Downgraded

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A couple of prominent social media stocks kicked off the week with mixed moves following some key analyst updates. Social media often gives users the chance to review restaurants, products or businesses, but the tables have turned and now analysts are reviewing a couple of these stocks.

24/7 Wall St. had the chance to review these analyst reports that are moving some social media stocks on Monday, and we have included some of the highlights.

JPMorgan cut its price target for Snap Inc. (NYSE: SNAP) to $18 from $20. The reasoning behind this cut is a decelerating ad business in the third quarter.

The firm believes that Snap will have a slower-than-expected pace for scaling its ad platform. This is the result of Snap’s new products, including self-serve Snap ads, which could take some time to gain traction.

At the same time, daily active user additions are expected to drop to 8 million from 10 million for the second half of the year due to increased competition from Facebook. However, what could really hurt Snap, is its lockup expiration of about 70% to 80% of Snap shares, coming in late July, which could drop shares before the lockup and after. Snap’s Spectacles are also expected to be have a softer reception than previously thought.

Shares of Snap were trading down 1.9% at $20.69 on Monday, with a consensus analyst price target of $21.10 and a 52-week range of $17.59 to $29.44.

Merrill Lynch upgraded Yelp Inc. (NYSE: YELP) to a Buy rating from Neutral and raised its price objective to $37 from $35, implying upside of nearly 30% from the previous closing price. The brokerage firm saw this as a rare multiple expansion opportunity in this bull market.

The firm noted that lower revenue guidance may have obscured the fact that user activity and new customer adds stabilized in the first quarter. The risk versus reward is favorable, with the stock trading at 10 times EBITDA. Again Merrill Lynch pointed out that this is one of the rare multiple expansion opportunities (historically) in the sector.

Shares of Yelp were last seen up 2.9% at $29.62, with a consensus price target of $31.47 and a 52-week range of $25.93 to $43.41.