Hold Rating Maintained Amid Modest Revenue Growth and Increased Infrastructure Investments – TipRanks Financial Blog

TD Cowen analyst John Blackledge maintained a Hold rating on Snap (SNAP – Research Report) today and set a price target of $11.00.

Geoff Meacham has given his Hold rating due to a combination of factors regarding Snap’s recent performance and future outlook. Snap’s fourth-quarter revenue showed a modest year-over-year increase of 4.7%, slightly under consensus estimates, and was buoyed by the more than 200% growth of Snapchat+. However, direct response advertising only saw a 3% rise, while brand spending actually decreased by 3%. Despite revenue falling short of expectations, EBITDA significantly outperformed consensus, driven by lower operating expenses and a positive restructuring impact.

The guidance for the first quarter of 2024 indicates that revenue growth is expected to be in line with consensus, yet EBITDA forecasts are substantially below expectations, reflecting increased infrastructure costs. These costs are associated with investments in machine learning infrastructure and new features like the My AI chatbot, which are aimed at enhancing monetization and content engagement. The combination of near-consensus revenue performance with concerns about profitability due to higher investment costs has led to the decision to maintain a Market Perform rating, with a lowered price target from $14.00 to $11.00.

In another report released today, Goldman Sachs also reiterated a Hold rating on the stock with a $13.50 price target.

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Snap (SNAP) Company Description:

Founded in 2010 and based in California, Snap, Inc. is a social media company and provides a camera platform in the U.S. and internationally. It has developed many technological products and services including Snapchat, which uses the camera and editing tools to take and share Snaps; Bitmojis, which are personal emojis; Spectacles, which are wearable sunglasses capable of taking Snaps and interacting directly with the Snapchat application. The company’s primary source of revenue is advertising.

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