Snap (SNAP) stock took a jab straight on the chin following the release of some sub-par third-quarter results. Revenues fell shy of the consensus estimate, with Apple (AAPL) and its latest iOS version being to blame.
Indeed, the broader social-media space has been shaken to its core, with Apple’s user-first, privacy-focused updates. SNAP stock plunged around 22% following the results. Today, the stock has lost about one-third of its value compared to its all-time high from earlier in the year.
Many Apple users are opting to deny app-tracking requests, taking a meaningful bite out of the ad business. Still, it would be a mistake to think that Snap can’t snap out of its funk, as it looks to adapt.
Undoubtedly, CEO Evan Spiegel’s comments were encouraging. He had less hostility in his words versus some of the other social media giants that had a stride taken out of their steps as a result of Apple’s significant iOS ad-tracking change.
Spiegel and his team are worth betting on. In due time, they will find their way around the iOS issue common to most social-media firms, including Meta Platforms (FB), formerly known as Facebook. If anything, the disruption could give Snap a chance to take share away from the social-media top-dog that is Meta, as it looks to pivot and target younger audiences.
Over the long run, the ad growth trajectory still looks incredibly good. Apple’s updates will take a big bite out of the momentum, but in due time, the company will innovate its way around an update that the company itself cannot control.
Indeed, Snap is focusing its efforts on what it can do to improve its business given the less-than-ideal circumstances, rather than opting to go to war with Apple via a barrage of negative headlines. At the end of the day, Snap’s CEO is ready to step up to the challenge.
Despite the recent bump in the road post-earnings, I am bullish on SNAP stock, as the company looks to move on and innovate its way out of recent Apple-induced disruptions. (See Analysts’ Top Stocks on TipRanks)
Many Reasons to Look beyond Apple’s Sales-Dampening Updates
Apple isn’t taking away the punch bowl from the likes of Snap or Facebook. Updates are putting the power back in the hands of the user. By keeping firms, especially social-media firms that are more reliant on ad-tracking, on their toes, Apple may ultimately be pushing such firms to innovate. In the grander scheme of things, that may be a positive for the industry.
Snap, one of the most compelling growers in the space, may walk away less scathed from the big updates than most think. The stock is in a bear market, and it seems as though investors and analysts doubt the firm’s abilities to continue thriving in this new age of limited ad-tracking.
Undoubtedly, Snap is one of the more innovative social-media companies out there. Whether we’re talking about risky endeavors like Spectacles, or features that rivals just love to copy, it’s clear that Snap is a terrific bounce-back candidate, as it looks to innovate its way to the top.
Snap Has the Ability to Pivot amid Industry Pressures
Snap isn’t raking in hefty amounts of profits, as Facebook is. Unfortunately, Apple’s updates will push sustained profitability further down the road. However, for growth-savvy investors, it’s not too big of an issue, as long as the firm is still growing its daily active users (DAU) count.
For the latest quarter, DAU surged over 20% year-over-year to 306 million. That’s impressive. While ad revenues will be dampened, as long as the firm can continue hitting the spot with consumers, the firm will be able to expand its wings into new verticals that could be immensely profitable in the distant future.
Indeed, social shopping is a space where Snap could make a major splash, as the metaverse looks to go mainstream in the latter half of this decade. PayPal’s (PYPL) interest in Pinterest (PINS) was remarkable. While PayPal walked away, for now, its interest alone is a sign that social shopping (perhaps in the metaverse) could be the way of the future.
Wall Street’s Take
Turning to Wall Street, Snap has a Strong Buy consensus rating, based on 20 Buys and six Holds assigned in the past three months. The average Snap price target of $75.88 implies 38.8% upside potential.
Analyst price targets range from a low of $53.00 per share to a high of $104.00 per share.
The Bottom Line on SNAP Stock
DAU growth momentum is still solid, even as people return to the physical realm again. Spiegel is likely to innovate his way around industry-specific issues, and once Snap demonstrates its adaptability, the stock could find itself back on the ascent.
For now, keep watch on DAUs and other innovative measures that could allow Snap to pressure its rivals, as it looks to follow suit with Meta, Apple, and other opponents into the metaverse.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
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