Snap hit another all-time low in its seemingly endless downward slide. But, according to one analyst, there’s a way to stop the bleeding.
Snap fell to a low of $US12.53 a share on Wednesday, making for its lowest print since its March 1 initial public offering.
According to Justin Post, an analyst at Bank of America Merrill Lynch, there’s one key metric that Snap can hit in its August 10 earnings report that can cause shares to reverse course.
“We continue to believe the [daily active users] number will be the most important metric for Snap, as user reach is a proxy for future revenue opportunity,” Post wrote. “We assume 10mn net adds q/q in 2Q, bringing DAU to 176mn (+23% y/y). We believe anything north of 8mn net adds would satisfy the Street given concerns.”
Snap has been facing mounting pressures from the competition, mainly Instagram and Facebook. Investors are prone to comparing social media networks to the rapid growth and staggering size of Facebook and its platforms, which recently broke above 2 billion monthly active users, according to Post.
Snap has been recently introduced new ad products, and Post says the company is doing a good job generating revenue from its users. Post expects revenue per user to increase 24% compared to last quarter, which is much better than Facebook’s recently reported 12% growth.
Shares are also under pressure because of the recent lockup expiration that allows 400 million shares to be traded for the first time. It’s estimated that 1.2 billion shares will be available for trading for the first time over the next few weeks.
BAML is neutral on Snap, and has a $US20 price target. That’s 59.6% higher than Snap’s current level.
Currently, Wall Street is anticipating a loss of $US0.30 per share on revenue of $US189.03 million according to data from Bloomberg.
Snap is down about 26% from its IPO price of $US17 a share.
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