RBC: There's 3 things Snap can do to turn itself around (SNAP)

pulse

November 8, 2017 5:56 PM

There's three things Snap can do to turn the company around, according to RBC Capital Markets.

Snap reported dismal earnings that sent its stock down 20% on Tuesday.
The company faces significant headwinds in drawing new users, engaging old ones and creating value, but it still has potential.

While Snap's earnings miss disappointed Wall Street, RBC Capital still sees the social media company as "a very interesting asset with great product innovation."

RBC Analyst Mark Mahaney highlights three issues that he wants the company to address in order to fall back in investors' graces:

RBC isn't entirely bullish on Snap's future. The bank lowered its price target by 12 cents to $15. Mahaney said that improving its advertising penetration, traction with older and international demographics and new product innovation can be an additional catalyst to Snap shares.

The company missed estimates for both sales and daily average users on Tuesday. Snap reported revenue of $207.9 million, missing the Wall Street consensus of $235.5 million. Its daily average users grew by 4.5 million quarter over quarter to 178 million users, well shy of the 7 to 8 million users that analysts were expecting the company to gain.

Much of this miss stemmed from weak user growth and Snap's programmatic ad buyers not translating into much ad revenue growth. Automatic ad placements in its videos are priced at a much lower rate than traditional, deliberate ad placements. This resulted in a year over year loss of 60% in ad impressions.

Snap stock is trading down 15.89% at $12.72 a share on Wednesday. It's down 25.18% from its initial public offering price of $17 in March.

pulse