Even a Buy Rating Barely Helps Snap

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Snap Inc. (NYSE: SNAP) has fallen a long way since its initial public offering (IPO), but it seems that more analysts are starting to come around and support the stock. Although some analysts have weighed in on the shares after the IPO, most have taken a bearish perspective, but a new report issued on Monday has a street-high target. However, this barely propped up the stock.

James Cakmak from the firm Monness, Crespi, Hardt weighed in on the stock, calling for an upside of roughly 25%. The firm initiated a Buy rating with a $25 price target. There are some concerns about Snap’s valuation, and it ultimately could be a value trap. According to Cakmak, “There is substantial execution risk, but we’re prepared to give the benefit of the doubt at this stage.”

This company’s flagship product, Snapchat, is a camera application that was created to help people communicate through short videos and images. The company calls each of those short videos or images a Snap. On average, 158 million people use Snapchat daily, and over 2.5 billion Snaps are created every day.

Snap detailed its most recent finances in an SEC filing:

Worldwide advertising spend is expected to grow from $652 billion in 2016 to $767 billion in 2020. The fastest growing segment is mobile advertising, which is expected to grow nearly 3x from $66 billion in 2016 to $196 billion in 2020. We believe that one of the major factors driving this growth is the shift of people’s attention from their televisions to their mobile phones. This trend is particularly pronounced among the younger demographic, where our Daily Active Users tend to be concentrated. According to Nielsen, people between the ages of 18 and 24 spent 35% less time watching traditional (live and time-shifted) television in an average month during the second quarter of 2016 compared to the second quarter of 2010.

Prior to the Monness, Crespi, Hardt report, a few other analysts weighed in on Snap as well:

  • Susquehann reiterated a Neutral rating with a $22 price target.
  • Mizuho has a Neutral rating with a $20 price target.
  • Needham has an Underperform rating.
  • Moffett Nathanson has a Sell rating with a $15 price target.
  • Cantor Fitzgerald has an Underweight rating with an $18 price target.
  • Pivotal Research has a Sell rating with a Sell rating with a $10 price target.

Shares of Snap traded up 1.7% at $19.87 on Monday, with a consensus analyst price target of $18.13 and a 52-week trading range of $18.90 to $29.44.