- Benchmark analyst Mark Zgutowicz reiterated a Hold rating on Snap Inc (NYSE:SNAP).
- The analyst’s industry checks suggest the overhaul of SNAP’s DR (direct response) business over the past 6-12 months is gaining favor with advertisers in testing.
- He suspects SNAP’s Partner Summit next week will showcase a much more robust DR stack which could be a modest near-term catalyst for the shares.
- The analyst’s data checks indicate DTC ad spending on social broadly went negative Y/Y shortly after the SVB crash and has yet to recover to the plus side Y/Y.
- While he continues to monitor this dynamic, he remains sidelined with a Hold rating as advertiser sentiment remains the calm before the storm, and SNAP’s distant GAAP profitability leaves limited tangible support.
- SNAP has long offered a one-size fits all DR stack that did not delineate outcomes to a specific DR advertiser cohort and model. Instead, SNAP’s algorithms delivered a quasi-universal outcome (e.g., conversion value) that may have been optimal to one advertiser cohort while suboptimal to several others, leading their DR campaigns elsewhere (e.g. Facebook).
- Net-net, via advertiser tests over the past 6-12 months, the analyst hears SNAP’s rebuilt DR stack is now optimized to a broader set of advertiser conversion models, producing more optimal outcomes.
- With a new scalable DR stack and key recent hires, including Ziggy Lin (previously head of product monetization at TikTok), SNAP is getting its competitive edge back.
- Snap will need to beef up underinvestment in its product marketing team, where SNAP trails versus peers.
- Meta Platforms Inc’s (NASDAQ:META) product marketing team on the monetization side will be slimmed down nearly 40% to sub-700 this year, which is still a monstrous advantage over SNAP’s sub-50 heads, by the analyst’s estimates.
- Net-net, the analyst remains interested to learn how management plans to thread the needle on NTM growth investment vs. cost discipline.
- Price Action: SNAP shares traded higher by 2.12% at $10.58 on the last check Tuesday.
Is Tencent Winding Down Its Big Investments?
Key Takeaways:
Reuters reported Tencent might sell some or all of its Meituan holdings this year, though Tencent called the report ‘inaccurate’
Some think Tencent might sell other stakes in its more than 70 U.S.- and Hong Kong-listed portfolio companies to raise funds to buy back its shares
By Fai Pui
