Snap Inc (NYSE: SNAP) reported weak
third-quarter earnings results Tuesday, revealing challenges with monetization potential and user growth.
The Analyst
Morgan Stanley's Brian Nowak.
The Rating
Morgan Stanley downgraded Snap Inc from Equal-weight to Underweight,
decreasing its price target from $14 to $11.
The Thesis
New structural hurdles exist for Snap's core ad unit format, and competition from Facebok Inc (NASDAQ:
FB) is also a concern, Nowak said. (See Nowak's track
record here.)
Morgan Stanley underestimated Snap Inc's monetization and engagement
challenges and growing execution risks and overestimated the chances of a turnaround, he said.
Snap Inc is unlikely to be able to monetize its core "tap-based" story
product, Nowak said. Snap must improve its advertising offering to drive faster ad dollar growth, the analyst said. He lowered 2018
and 2019 ad revenue estimates by 9 percent and 10 percent, respectively.
Morgan Stanley did increase its adjusted EBITDA for Snap, citing the company's exercise of cost discipline.as the company is
exercising cost discipline.
In the long term, the lower revenue base reduces Snap's long-term cash flow, Nowak said.
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Latest Ratings for SNAP
| Date |
Firm |
Action |
From |
To |
| Nov 2017 |
Morgan Stanley |
Downgrades |
Equal-Weight |
Underweight |
| Nov 2017 |
Barclays |
Maintains |
|
Equal-Weight |
| Nov 2017 |
Oppenheimer |
Maintains |
|
Outperform |
View More Analyst Ratings for
SNAP
View the Latest Analyst Ratings
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