Analysts Cut Targets for Snap, Twitter Amid Apple Challenges
Dec 21, 2021
Stocks in social media platforms Snap and Twitter have struggled in recent months as a result of Apple's ad tracking privacy rules. Loop Capital analysts recently lowered their targets on both.
On Tuesday, Twitter's stock (TWTR) increased 3.2 percent to close at $44.36, while Snap's stock (SNAP) increased 3.8 percent to close at $46.10. The S&P 500 index increased by 1.8%. Twitter's stock has fallen about 30% in the last six months, while Snap's stock has fallen roughly 27%.
In Monday's notes, Loop Capital Markets analysts Rob Sanderson and Alan Gould lowered their price targets for Twitter to $65 from $84 and Snap $68 from $79, respectively.
Apple (AAPL) updated its mobile operating system earlier this year, prompting customers to opt - in or out of being followed by advertising. Because Twitter and Snap' Snapchat employ such trackers to give more insight into their advertisements. The modifications to the identification for advertisers, or IDFA, affected results, particularly for Snap.
"We believe the community of app installation advertisers is quite knowledgeable, realizes the market is regressing from the near-real-time feedback loop enabled by IDFA, and will be receptive to Snap's measurement solutions," the analysts said.
The analysts also added that comments from advertisers did not assist investors in forecasting the significant decline that occurred in October when Snap released fiscal third-quarter results.
For Twitter, which obtains the majority of its revenue from brand advertising rather than actionable ads such as online shop product listings, the analysts believe investors will focus on user growth and the firm's margin forecast.
According to estimates, Snap's revenue would reach $8.25 billion in the fiscal year 2023, while Twitter's revenue will reach $7.89 billion.
"We believe that expectations are low and already reflect a pretty big shortfall, while we believe that firming up the 2022 margin projection may be necessary before valuation improves," they said, referring to Twitter.
They believe Snap can commercialize its new Spotlight function, comparable to TikTok.
According to analysts, the 2022 Winter Olympics might deliver a significant financial boost to Twitter. They predict that the 2014 Sochi Olympics contributed between $10 and $11 million in income. Twitter's advertising revenue is much more than it was in 2014. Additionally, next year arrives the World Cup, which they estimate generated roughly $25 million in revenue for Twitter in 2014.
"We believe that a diplomatic boycott will have little effect on the games' internet audience. However, rumblings of NHL hockey stars refraining owing to COVID protocols may," they stated. "A $40-50 million contribution from the Olympics would result in a 4% to 5% increase in sales growth in the first quarter."
Brand advertising in early 2021 was stifled by the Jan. 6 insurrection. According to the experts, this presents an easy comparison for ad platforms in 2022, particularly for Twitter