Snap Downgraded at JMP Securities On Competition From YouTube Shorts and Reels

Snap (NYSE: SNAP) shares are down premarket after the stock was re-rated at Market Perform from Outperform by JMP Securities.

Analyst Andrew Boone downgraded the stock and also removed the price target, telling investors the firm is reducing estimates again due to declining US time spent on Snap.

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The analyst believes it is a direct consequence of increased competition from Reels and YouTube Shorts.

The analyst believes it is a direct consequence of increased competition from Reels and YouTube Shorts.

Boone added that he now prefers shares of Meta and Google over Snap, as both have more mature short-form video products, which he believes will attract more user time over the next few years. In addition, the analyst wrote that short-form video platforms are taking a share of time from Snapchat.

At the time of writing, Snap shares are down over 2%, adding to their more than 75% decline over the last 12 months.

The downgrade is in contrast to New Street’s rating on Snap. The firm initiated the social media company’s shares with an “out-of-consensus” Buy rating earlier this month, with analyst Dan Salmon stating that while falling US engagement is the key risk, he believes revenue growth can rebound more than the Street expects in 2023, with new ad product gaining traction. In addition, the analyst stated that he expects profitability and margin expansion will be “re-invigorated.”

Overall, out of 27 analysts, five have a Buy rating on Snap, with 20 at Hold and two at Sell. The average price target of $10.28 represents a potential 4.9% upside for the stock.