You will be redirected back to your article in seconds

Snap Stock Climbs After Analyst Upgrade Citing Reduction in Snapchat’s ‘Seedy Influencer Content’

Shares of Snapchat parent Snap rose over 10% Thursday — to a six-month high — on an upgrade by a Wall Street analyst who’s turned bullish on the stock, in part because the app has shifted away from “clickbait/seedy influencer content” to more premium-produced content.

In a note Thursday, BTIG Research analyst Rich Greenfield upgraded Snap from “neutral” to “buy,” with a $15-per-share price target based revised financial projections. It’s the first “buy” rating from the analyst since the company’s IPO in March 2017. Shares were up as much as $11.14 in morning trading; note, however, the stock is still well off its 52-week high of $17.97 and less than half its peak following the IPO.

Among the factors for his upgrade: Snapchat’s Discover section has made a “meaningful reduction” in content with a “low-quality, clickbait/T&A feel,” in favor of premium publisher content, which reflects the change in Snapchat’s underlying content-recommendation algorithm, Greenfield wrote. That should lead to more user time spent in Discover and more attractiveness to advertisers.

Snap has made a concerted effort to bring professionally produced original and third-party content to Discover, and its much-derided overhaul of the Snapchat app in 2018 was aimed at splitting personal messaging (with friends) from media aimed at general consumption. The company has ramped up its slate of TV-like short-form originals, from partners including Bunim/Murray Productions, the Duplass Brothers, Brad Weston’s Makeready, and Mark Boal, and has continued to expand its media partnerships with players including NBC, CBS, ESPN, Viacom, Discovery, A&E and Condé Nast Entertainment. At the same time, the architect of Snap’s media strategy, VP of content Nick Bell, last fall announced his departure from the company after nearly five years.

Based on Snap’s improving advertising-growth trends, Greenfield revised estimates for 2019 revenues upward to $1.65 billion for the year (versus $1.4 billion previously). He predicts an adjusted loss of -$268 million (up from -$500 million) and a net loss of 71 cents per share (versus a net loss of 92 cents prior).

Snap’s challenges remain, Greenfield acknowledged. Those include chaos among its the senior management team and high-level exits, a botched redesign last year, its delay in releasing a viable Android version of the Snapchat app, and a failure to recognize the threat of Instagram (which successfully copied Snapchat’s Stories feature). In addition, there’s a pending SEC and Justice Department probe into allegations that the company failed to provide important disclosures leading up to its IPO.

Snap reported 186 million average daily users for Snapchat for the fourth quarter of 2018 — down 1 million from the end of 2017 and flat versus to the prior quarter.

In his revised estimates, Greenfield predicts negative free cash flow of only $510 million for 2019 and “no longer believe the company will need to raise capital next year, reducing the financial risk/threat of a DOJ/SEC settlement.”

“The good news for Snapchat is that performance advertising can scale rapidly, enabling meaningful revenue beats,” the analyst wrote in the note. But, he added, “it is critical for Snapchat to convince higher quality brands of the performance ROI that can be found on the platform.”

Other reasons Greenfield cited for the upgrade: “user stickiness,” saying even the “wide array of missteps over the past two years” has not led to a collapse of users or usage; evidence that Snapchat’s newly rebuilt Android app (code-named Project Mushroom) provides better performance; and improved morale.

While “2018 was an awful year for Snapchat with morale at all-time lows,” Snap has made new senior executive hires over the past few months that have boosted morale, according to Greenfield. Specifically, he cited Snap chief business officer Jeremi Gorman, formerly head of Amazon’s global advertising sales, as burnishing the company’s perception among brands and advertisers.

More Digital

  • T-mobile - Netflix - John Legere

    T-Mobile Passes Netflix Price Hike Through to Subscribers

    T-Mobile is getting ready to raise prices for subscribers who have taken advantage of its “Netflix On Us” promotion: The mobile carrier will begin charging existing customers who have participated in the promotion an additional $2 per month to account for Netflix’s recent price increase. Consumers will see their bill go up starting on 6/2. [...]

  • Oona King

    Snap Hires Google Exec Oona King as First VP of Diversity and Inclusion

    Snap continues to fill out the ranks of its revamped leadership team: The Snapchat parent tapped Oona King, most recently Google’s director of diversity strategy and a former member of British Parliament with the Labour Party, as its first VP of diversity and inclusion. King, who starts at Snap on June 11, is also the [...]

  • Chrissy Teigen

    Chrissy Teigen to Rule Over Small-Claims 'Chrissy's Court' in Show for Jeffrey Katzenberg's Quibi

    Chrissy Teigen is going full-on “Judge Judy” in a reality show ordered by Quibi, the mobile-video subscription start-up venture founded by Jeffrey Katzenberg. In each episode of “Chrissy’s Court,” the model-influencer will reign as the “judge” over one small-claims case. Like the reality TV shows it’s patterned after, the plaintiffs, defendants, and disputes are real [...]

  • IGTV-Landscape

    Instagram's IGTV Adds Support for Horizontal Videos — but Still No Monetization

    Instagram is still searching to find the right recipe for IGTV, the long-form video service it debuted nearly a year ago. In the hopes of encouraging usage of IGTV, Instagram is breaking the original design that allowed only vertical video– to now support horizontally oriented videos as well. It’s a change that bows to the [...]

  • Facebook Logo

    Facebook Took Down 2.2 Billion Fake Accounts in Q1

    Facebook saw a huge jump of bots trying to create fake accounts during the first quarter, with the company revealing Thursday that it took down 2.19 billion such accounts over the first three months of this year. “We’ve seen a steep increase in the creation of abusive, fake accounts on Facebook in the last six [...]

  • Netflix Unveils Lonely Island Musical Tribute

    Netflix Unveils Lonely Island Musical Tribute to Jose Canseco, Mark McGwire

    The Lonely Island comedy troupe has dropped a half-hour Netflix special featuring a musical tribute to baseball greats Jose Canseco and Mark McGwire. “The Lonely Island Presents: The Unauthorized Bash Brothers Experience” features Andy Samberg and Akiva Schaffer as the former Oakland Athletics teammates who became known as “the Bash Brothers” for their prowess at [...]

  • Rotten Tomatoes

    Rotten Tomatoes Revamps Movie Audience Scores to Focus on Verified Ticket Buyers

    Rotten Tomatoes is dramatically changing its Audience Score methodology for movies: The site’s standard user rating will now reflect only moviegoers who can prove they’ve bought a ticket to see it in a theater. It’s another troll-fighting move by Rotten Tomatoes, designed to curb coordinated “review bombs” aimed at pushing down the Audience Score for [...]

More From Our Brands

Access exclusive content