After a tough 2018 for Snap, some analysts are optimistic the company is bouncing back.
Last year, Snap struggled with a controversial redesign of its Snapchat app, its first-ever declines in daily active users, an exodus of top executives, and heightened competition from rival Instagram.
Things seem to be stabilizing this year. Snapchat has stopped losing users, and now analysts are hopeful its parent company Snap’s prospects are improving, especially following its first-ever Partner Summit in Los Angeles last week, which featured new product and business announcements.
“We came away from Snap’s first big partner summit feeling more upbeat than before on the cadence of innovation and the overall trajectory of the business in 2019,” wrote Barclays analyst Ross Sandler in a recent investor note.
The company’s stock is reflecting this sentiment, too. It has more than doubled since the beginning of the year, although it’s still trading below its $17 IPO price.
“2018 was a year of transition,” said Ron Josey, an analyst at JMP Securities. “Snap is in a much better spot this year than they were a year ago.”
At its event last week, Snap (SNAP) announced several new features that it hopes will increase the time users spend on the Snap (SNAP)chat app. The company launched a new gaming platform featuring titles only available on Snap (SNAP)chat, more additions to its lineup of original shows, and a way to post Snap (SNAP)chat Stories to other platforms such as Tinder.
Snap also outlined new monetization and advertising opportunities, including six-second ads in games and ways for advertisers to target users outside of the Snapchat app for the first time.
JMP’s Josey said he is impressed with Snap’s reach and continued innovations in augmented reality and direct messaging. At the event, the company said it now reaches 90% of 13 to 34-year-olds in the US.
Analysts also believe Snap is “growing up.” Following a visit to the company’s new headquarters in Santa Monica, Jefferies analysts said in March they “felt like [Snap] had grown up from a startup to a more mature company,” according to CNBC. The firm also said it was “generally impressed” with the company’s “cohesion and positive steps on the road to recovery.”
In its most recent quarter, Snap stopped losing daily active users after two straight quarters of losses. The company’s revenue hit a record $390 million, up 36% from the same period a year ago and well ahead of what investors had expected.
Snap’s new, supposedly faster Android app is rolling out, which could help it attract more users. In the past, Android users complained the app often crashed and had lesser camera quality than iOS.
Not everyone is as optimistic. Research firm eMarketer slashed its Snapchat user estimates on Wednesday, citing the app’s unpopular redesign. The firm expects Snapchat to have 77.5 million monthly users in the US in 2019, which is down 2.8% from last year. (Snapchat only shares daily user statistics, not monthly).
“I don’t think it’s all lost for Snapchat,” eMarketer analyst Jasmine Enberg told CNN Business. “It’s difficult to tell right now in the beginning of the year, but all of these [announcements] are good signs to increase engagement within the app, and possibly even add new users if this Android app turns out well.”
Snap’s priority this year should be all about increasing engagement and adding users, according to Josey.
“Things are certainly better than they were six to nine months ago, or even three to six months ago,” he said. “Now it’s a matter of, can you execute and keep the momentum going.”
