Popular equity research firm MKM Partners says it’s cutting back on first-quarter estimates and price estimates for online advertising giants. However, Snapchat (NYSE:SNAP) stock is an exception to the case, with its price target unchanged at $47.
According to MKM, four main macro headwinds affect online advertising businesses. These include the Russia-Ukraine war, the indirect impact of the war on Europe, inflation, and reduced brand ad spending due to concerns surrounding geopolitical content.
Advertising spending rose impressively last year due to re-opening tailwinds and secular penetration of digital advertising. The firm believes that there will be a marked slowdown in results for 2022 due to tough comps. U.S. spending will decrease to 9% to 11% growth. That number could increase around the mid-term elections.
Snapchat has been an anomaly among social media and advertising giants of late. Despite Apple’s (NASDAQ:AAPL) iOS privacy changes, it recently wrapped up another stellar fourth quarter. The pressures from the privacy changes have negatively impacted results for most advertising companies. However, Snapchat posted $1.3 billion in revenues during its fourth quarter, a 42% increase from the same period last year. Additionally, there was a remarkable 20% increase in active user growth during the quarter.
SNAP stock has generated over 15% returns in the past month, ahead of the S&P 500’s returns. However, the stock has shed over 57% of its value in the past six months. It looks significantly more attractive after the dip, and analysts, including MKM, expect an incredible upside ahead. Analysts at Refinitiv, believe there’s at least a 70% upside to SNAP stock. Hence, with the company firing on all cylinders and a robust outlook ahead, SNAP stock seems like an ideal bet at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
