Snap Stock Falls After JMP Downgrades It, Citing Less Time Spent in the US

Snap Stock

Snap Stock (NYSE:SNAP)

JMP Securities downgraded the social network and camera startup Snap (NYSE:SNAP) on Tuesday, citing a drop in time spent in the United States as the reason for the downgrade. Snap stock dropped about 2% in premarket trade on Tuesday.

Analyst Andrew Boone lowered the firm’s rating on Snap stock to market perform from market outperform, noting that the decrease in time spent on the app is likely due to a “direct consequence of increased competition” from Meta Platforms (NASDAQ:META) Reels and YouTube’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Shorts. This was the reasoning behind the analyst’s decision.

According to Sensor Tower, Boone observed that the amount of time spent on Snap in the United States decreased by 7% year-over-year in the fourth quarter. This is a 7-point fall from the third quarter. Boone cited competition from TikTok, Reels, and YouTube Shorts as the cause.

In a letter to clients, Boone said, “Importantly, these are Snap’s most monetizable surfaces as we anticipate impression growth to be constrained going forward.” “Impression growth is expected to be challenged looking ahead.”

Boone noted that Apple’s (NASDAQ:AAPL) transition to iOS as the Identifier for Advertisers is still influencing advertisers’ targeting and attribution, likely affecting ad spending for Snap (NYSE:SNAP) and prompting them to shift their focus to mid- and upper-funnel objectives.

“To that end, impression growth faces challenges while macro adds further downside risk since we are 4% below expectations for 2024 revenue,” Boone continued. “This brings us to the conclusion that we are facing a potential loss of revenue.”

The analyst continued by saying that if Snap (NYSE:SNAP) were to push into recommendations and enhance Spotlight, it might impact the company’s gross margins. He based this prediction on the fact that doing so would need significant computational power.

The week before last, an investment company called Truist was wary about Snap (NYSE:SNAP) since spending on the platform increased by just 2% from the previous year. It had a “limited” presence at the Consumer Electronics Show.

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