It’s time to move to the sidelines on Snap following a second-quarter miss , according to Citizens. Citizens analyst Andrew Boone downgraded the social media stock to market perform from market outperform. The analyst also removed his prior price target of $12 per share. The stock plunged 18% in Wednesday’s premarket after its second-quarter revenue missed expectations. The company’s top line came in at $1.34 billion, while analysts polled by LSEG expected sales of $1.35 billion. The company’s global average revenue per user came out to $2.87, missing expectations of $2.90. SNAP YTD mountain SNAP YTD chart One headwind the company faces is increasing competition for user time and attention, Boone said. “While global time spent watching content and the number of content viewers increased Y/Y, Snap did not disclose North America-specific engagement, and we believe time spent fell,” he wrote. “We worry that engagement losses are likely to continue as it is unclear to us how Snap wins back users’ time.” Boone also pointed out that Snap’s pullback in infrastructure costs over the last few quarters may save money at the cost of underinvesting in artificial intelligence infrastructure. “While Snap has $2.9B of cash, we project it has just 8% EBITDA margins in 2025, and we question whether Snap has room to make the material AI investments needed to compete with larger platforms for user engagement and ad dollars,” the analyst added. Additionally, the analyst highlighted trouble in Snap’s advertising business. Ad revenue grew just 4% year over year, marking a slowdown from the 9% growth the company saw in the first quarter. “With advertising execution still volatile, we are moving to the sidelines following results as we believe the risk/reward in shares is now balanced,” he said. Most analysts have a neutral stance when it comes to Snap. Of the 43 who cover the stock, 33 rate it a buy or strong buy, according to LSEG.
