4 Snap Analysts Talk ARPU Outlook, TikTok Rivalry, Apple Privacy Changes

Snap Inc SNAP shares were moving to the downside Friday following the release of the social media platform's fourth-quarter results.

The Snap Analysts: Rosenblatt Securities analyst Mark Zgutowicz reiterated a Buy rating on Snap shares and increased the price target from $50 to $70.

Needham analyst Laura Martin maintained a Hold rating.

Raymond James analyst Aaron Kessler maintained a Market Perform rating.

KeyBanc Capital Markets analyst Justin Patterson maintained an Overweight rating and increased the price target from $60 to $63.

Needham Breaks Down Snap's Numbers: Snap's fourth-quarter revenue climbed 62% year-over-year to $911 million and the loss per share was 8 cents, narrowing from the year-ago period and beating Needham's estimates, Martin said in a note.

Adjusted EBITDA quadrupled to $166 million, the analyst said. 

Daily active users climbed 47 million from a year ago and increased 16 million from the previous quarter to 265 million; average revenue per user rose 33% to $3.44; and free cash flow increased by $7 million to negative $69 million, she said. 

The introduction of Spotlight has helped Snap better compete with TikTok, Martin said. 

"So long as Snap can keep Spotlight 'brand safe' we expect Spotlight to drive upside to Snap's growth in 2021."

Needham said it likes the growing value of Snap's 75% reach among U.S. 18-34-year-olds, Gen Zs interest in shows and publisher content in the quarter.

Related Link: How To Trade The Snap Earnings Report Using Options

Snap's ARPU Could Double, Rosenblatt Says: After Snap's impression price inflected to positive territory in the third quarter, the metric saw accelerated year-over-year growth of over 50% in the fourth quarter, Rosenblatt analyst Zgutowicz said.

This translates to North American average revenue per user of $6.30 in the second half, the analyst said, adding that Snap has gained brand traction with TV-like ad units.

"If we step away from our cautious conservatism surrounding iOS disruptions, Snap's current momentum with brands suggests an ARPU double in the next couple years," he said. 

Snap's Spotlight competes against TikTok and Instagram Reels, which is part of Facebook, Inc. FB.

Snap Spotlight had about 100 million montly active users in January, Zgutowicz said, and the Spotlight creator fund will pay $1 million per day at least through the first quarter to draw top video creators.

Snap's advantages include its 

Among Snap's advantages is its augmented reality and camera IP, while its disadvantages include TikTok's incumbency status and generally good ads platform and Facebook's deep pockets, scale, attrition and prowess, according to Rosenblatt. 

Raymond James Says Risk-Reward Fairly Balanced: Snap saw continued strong adoption of its various ad products, and engagement trends accelerated, Raymond James analyst Kessler said.

Yet the company noted some softness in the first two weeks of January due to events at the U.S. Capitol and some potential headwinds later in the first quarter from iOS platform policy changes that could impact ad targeting, the analyst said.

Despite strong revenue trends, Raymond James remains on the sidelines for Snap, as it views the risk-reward as fairly balanced.

KeyBanc Recommends Buying Any Dip In Snap: Snap ended 2020 on a high note, with accelerating revenue growth and intrinsically high engagement, KeyBanc analyst Patterson said.

The company's management also expressed confidence in more than 46% annual revenue growth in 2021 and beyond, the analyst said. 

"While positive, we see some NT overhang as investors wrestle with the nuances around Apple Inc AAPL IDFA," he said. 

KeyBanc said it recommends buying any dip.

"Snap's growth prospects appear bright, and we expect the Feb. 23 analyst day will highlight this in more detail."

SNAP Price Action: Snap shares were rising by 6.48% to $62.10 at last check Friday. 

Related Link: Will Snap Stock Reach $75 By 2022?

Photo by Thought Catalog on Unsplash.

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Posted In: Analyst ColorEarningsNewsPrice TargetReiterationAnalyst RatingsMoversTechTrading IdeasAaron KesslerJustin PattersonKeyBanc Capital MarketsLaura MartinMark ZgutowiczNeedhamRaymond JamesRosenblatt SecuritiesTikTok
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