Key points:
- Snap stock slipped 9% on Wedbush analyst downgrade
- Hurdles to revenue growth include growth in TikTok competition and IDFA data headwinds
- Snap might have to re-evaluate their verticals to secure an appropriate monetization strategy as digital advertising turns a page
Snapchat (NYSE: SNAP) is more exposed than ever; with multiple hurdles facing the company in the months and years to come. In the most recent earnings report from Snap, the company referred to slowing revenue from Apple’s changes to IDFA; a device identifier randomly assigned to iPhone’s, allowing advertisers to track user data and customize advertising accordingly. Following heightened user control, companies like Snap and Facebook, who rely quite heavily on personalized ads – find themselves in the firing line.
However, that’s not a be-all and end-all for Snap, but what might be is the stratospheric rise of TikTok. Not only is the application becoming hugely popular, TikTok’s general demographic mirrors Snap’s, hence it’s clear to see why analysts and investors appear concerned.
Following an insightful report from Wedbush analyst Ygal Arounian; stock dropped around 9% as evident obstacles were outlined. Arounian referred to the same IDFA headwinds that impacted the company’s recent Q3 earnings, suggesting that headwinds will continue across digital advertising – not a promising sign for Snap investors. Arounian downgraded Snap stock to Neutral from Outperform, with a $36 price target.
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With IDFA headwinds limiting Snap’s monetization, the likelihood of the company reaching their 50%-plus revenue growth seems a little far-fetched. Along with the tough competition surrounding the overlap between Snap and TikTok’s primary audience, 2022 might be tough for the company, unless they find other verticals that will allow them to effectively meet their targets – which at the moment, seem overly bold.
