Snap Inc (NYSE:SNAP)
Shares of Snap Inc (NYSE:SNAP) increased on Thursday as investment firm Bank of America maintained its buy rating on the camera manufacturer, adding that the positive tone of Chief Executive Evan Spiegel’s leaked memo is reassuring.
Although the memo’s claims of increasing daily active users to 450 million, generating $6 billion in revenue, $1.5 billion in adjusted EBITDA, and more than $1B in free cash flow may seem optimistic in light of the challenges the company has faced recently, analyst Justin Post noted that these statements are nonetheless encouraging.
A material macro improvement may not be required to achieve the company’s goals, according to Post in a note to clients. “More favorable macro conditions may be necessary to achieve these targets, but with August revenue growth at 12-15% estimated, Snapchat Plus is probably seeing better-than-expected traction, and easier revenue growth comps ahead,” Post wrote in the note.
In premarket trading, shares of Snap rose 1% to $11.57.
The company’s plans for augmented reality, which aim to increase to at least 10% of ad income by 2023, were also noteworthy in the memo Spiegel said. Along with merging the capabilities of a variety of services, such as Lens Studio, Lens Engine, Lens Cloud, and Snap OS with Spectacles, Snap also hopes to grow user interaction with AR features to 1 billion monthly active users.
According to the analyst, the company’s AR technology is probably being well-received by advertisers based on its revenue projections for 2023.
While dealing with a disruption in sales execution and more competition from ByteDance’s (BDNCE) TikTok and Meta Platforms, Post highlighted that it is of considerable concern that an economic slump could extend into the first half of next year (META).
But according to the analyst, any potential limitations on TikTok might be “a potential upside tail driver” for Snap.
Prioritizing revenue growth, community expansion, and augmented reality, Snap said last week that it would reduce 20% of its personnel and scale down on a number of projects.
Featured Image- Megapixl @Tatark