Snap Inc.’s latest quarterly results drew mixed reactions, prompting analysts to question whether the company was en route to replicating Twitter Inc.’s turnaround or whether Snap is barely even a growth name anymore.
The stock boomeranged in the aftermarket, initially rising by more than 10% before giving back most of its gains. Shares were recently up 2.6% in premarket trading.
At least two analysts deemed Tuesday afternoon’s results enough to no longer warrant a bearish call on the shares. Evercore ISI’s Anthony DiClemente upgraded Snap’s stock SNAP, +3.99% to in-line from underperform, while J.P. Morgan’s Doug Anmuth moved to neutral from underweight.
“User trends have now realized stabilization, and while profitability remains a likely long way off, monetization improvements have driven a reacceleration in revenue growth,” wrote DiClemente, who upped his price target to $12 from $5.
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J.P. Morgan’s Anmuth commented on momentum with Snap’s new Android app, which he suspects the company rolled out faster than it initially planned to due to “favorable early trends.” He also wrote that the company appears to be gaining traction with marketers as its ad tools become more “robust.”
Anmuth raised his target price to $11 from $7.
Others were more upbeat. “Yes, this seems like Twitter TWTR, +15.64% at the beginning of 2017,” wrote RBC’s Mark Mahaney, who has an outperform rating on the shares. He was encouraged by better-than-expected average revenue per user on a global basis and the company’s return to “material” daily-active-user (DAU) growth, though he found it “a bit odd” that management cautioned that the DAU growth rate for the current quarter could slow.
Needham analyst Laura Martin, however, reiterated her bearish stance, asking whether this “less bad” quarter for Snap could signify that the company has given up its status as a growth play. She’s concerned about a shift in focus at Snap, which now is working to add international users aged 13 to 34 after previously focusing on older users, as well as increased investments in marketing, sales, engineering, and content during the second quarter.
Martin rates the stock at underperform.
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Susquehanna Financial Group’s Shyam Patil called the latest numbers “OK” but said that improvement at Snap looks to be already priced in, given that shares have more than doubled so far this year. “While the business has bounced off the bottom, we think this is more than reflected in the stock… and we believe fundamentals will continue to remain under pressure,” he wrote.
Patil has a negative rating on the stock but bumped his target price up to $9 from $5.
Snap shares have climbed 94% in the past three months, as the S&P 500 SPX, +0.88% has risen 11%.
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