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DJ Snap and Pinterest Both Posted Solid Earnings. Here's What Wall Street Is Saying. -- Barrons.com

· 02/05/2021 18:08
By Max A. Cherney

After a poor showing in early trading Friday, investors appear to have changed their minds about Snap and its fourth-quarter results by midday, sending shares sailing more than 9% to close at $63.46.

Snap (ticker: SNAP) reported a mixed bag of results, beating expectations handily but also forecasting that the first quarter would see a larger-than-expected adjusted loss. Executives also warned of two potential negative impacts to the first quarter: a pause in spending surrounding the attack on the U.S. Capitol in January; and a change to Apple's (AAPL) iOS software that powers iPhones and iPads that could make it more difficult for the company to target ads.

The midday reversal in the stock occurred amid a swath of analyst price target increases. More than 20 banks raised target prices on Snap stock, according to a Barron's count based on FactSet data.

Wedbush analyst Michael Pachter summed up the company's earnings report as "two steps forward, one step back."

In a client note Friday, Pachter highlights that the company beat its fourth-quarter expectations across the board, and says the company has plenty of room to make more money from each of its users. Yet, Snap's guidance for this year suggests that it will be spending heavily on its technology to keep people on the platform -- not always the best thing for the share price. Pachter raised his target price to $52 from $34.50 and reiterated his equivalent of a Hold rating.

UBS analyst Eric Sheridan also raised his target price, increasing it to $70 from $62. In a client note, Sheridan wrote that he expects investors will, over time, become increasingly comfortable with the company's long-term potential. Sheridan expects many more details about the business's future plans at its analyst day on Feb. 23. Sheridan is bullish on the stock and rates it a Buy.

One of the few negative voices on the stock, Citi Research analyst Jason Bazinet, who has a Sell rating and $29 target price, said that one of the company's adjusted profitability measures in the company's first-quarter outlook was materially lower than consensus expectations.

Of the 40 analysts that cover Snap, 68% rate the stock a Buy and 10% have a Sell rating. The mean target price is $58.76, which implies a downside of 7.7% from Friday's closing price.

Pinterest stock, on the other hand, opened with a strong showing. Shares rose roughly 5% to $81.96 during regular trading, after the company reported a solid batch of results late Thursday. As Facebook (FB) and others have reported, demand during the holiday quarter for online ads was strong, and that helped Pinterest report revenue well above the consensus forecast.

At least 10 analysts were jubilant enough about the results to boost their target prices Thursday and Friday, according to a Barron's count and FactSet data. Wall Street is generally positive on Pinterest shares, with 62% of analysts rating it a Buy. There are no Sell ratings on shares.

Baird analyst Colin Sebastian wrote in a Thursday note to clients that Pinterest's fourth-quarter results capped "one of the most impressive recovery stories of the year." Sebastian noted that the company's improvements to its advertising platform and the surge in e-commerce contributed significantly to the its growth.

The average analyst target price for Pinterest shares is $89.90, which implies a return of 9.7%. The stock has advanced 274% in the past year, as the S&P 500 index gained 18%.

Write to Max A. Cherney at max.cherney@barrons.com

(END) Dow Jones Newswires

February 05, 2021 18:08 ET (23:08 GMT)

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