Last month, Snap Inc. (NYSE: SNAP) CEO Evan Spiegel warned that the macroenvironment had deteriorated even more since the company reported quarterly earnings in April and that current-quarter revenue would come in below the low end of the company’s own projected range. The share price dropped more than 40% and dragged other social media stocks down along with it.
UBS analysts have cut their estimates of year-over-year growth for 2022 from 24% to 17.5%, down from 64.2% growth between 2020 and 2021. Snap’s ad market share for this year is forecast at 1.1%, growing to 2.0% by 2025.
Noting that Snap’s ad buyers skew to large companies, “there could be some downside protection” compared to social media platforms that depend on smaller businesses. The risk there, however, is that exposure to consumer packaged goods and other consumer discretionary advertisers “could expose Snap to more cyclicality of revenue.”
UBS maintained its Buy rating on the stock but slashed the $45 price target to $17.
Pinterest Inc. (NYSE: PINS) was the hardest hit of the social media platforms by Snap’s May announcement, dropping by about 23%. Pinterest’s market share is expected to be 0.7% this year and for the next two years before rising to 0.8% in 2025.
The analysts mention a number of headwinds for Pinterest, the most potentially damaging being recent changes to Google’s search algorithms that Pinterest has not yet been able to find workarounds for. The problem “stands to impair the top of funnel user acquisition/re-engagement in a way reminiscent of Tripadvisor and Yelp.” Tipping the scale in Pinterest’s direction is the “commercial intent” of Pinterest’s users which is “compelling longer-term and could drive meaningful revenue growth, especially as Pinterest unlocks additional international markets.”
UBS maintained a Neutral rating on the stock but cut its price target from $35 to $19.
The analysts included Twitter and Amazon as part of this review. Amazon’s ad business now accounts for 8.9% of the online ad market and is expected to post revenue of $38.2 billion this year. UBS expects Amazon’s share to rise to 13% ($72 billion) by 2025.
Twitter’s ad revenue is expected to reach nearly $5.5 billion in 2022 (1.3% market share), rising to $9.6 billion (1.7% share) in 2025. UBS maintained its ratings and price targets for both companies.
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