Snap Inc. (SNAP) has reported stronger-than-expected Q4 results, prompting Citi to raise its target price to $13.50 from $13, while maintaining a "Neutral/High Risk" rating. The report highlights Snap's direct response (DR) advertising platform, which saw a 14% y/y revenue increase as the advertiser base doubled. Additionally, Snapchat+ subscribers reached 14 million, contributing $143 million in revenue, a 131% y/y increase. Despite these gains, brand advertising remains a challenge, with a 1% y/y decline, and Snap plans to invest in 2025, potentially limiting margin expansion.
Citi's analysis is centered around Snap's improving engagement trends, with global daily active users (DAUs) rising 9% y/y to 453 million, driven by the Spotlight feature. The company is also testing higher-priced subscriptions like Snapchat+ Platinum. However, Citi notes, "visibility remains somewhat limited," reflecting a balanced risk/reward scenario. The target price is based on a 23x 2026E EV/EBITDA multiple, reflecting improved revenue growth from DR ads and subscriptions.
Snap's current stock price is $12.23, up 5.43% from the previous close.