Why an Analyst Moved Snap Above Meta in the ‘Pecking Order’

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Snap stock is up 38% so far this year.

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Snap remains a top Internet stock pick by New Street Research, but is now ranked above Meta Platforms and Netflix, according to the firm.

New Street has compiled a list of seven Internet stocks that its analysts rate among the top picks and least favorite names in the space. When the firm launched the list in January, Amazon.com (ticker: AMZN) was the top pick, followed by Match Group (MTCH), Alphabet (GOOGL), Meta (META), Snap (SNAP), Netflix (NFLX), and Trade Desk (TTD). On Monday, that order notably changed.

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“We recommend investors get greedy and so we raise the risk/reward profile of our recommendations,” New Street analyst Dan Salmon wrote in a research note. Google parent Alphabet is now the firm’s top choice, followed by Match, Amazon, Snap, Meta, Netflix and finally The Trade Desk.,

Moving Snap above the giant meta on the list of tech stocks is a bold move. In 2022, Snap stock fell 81%, while Meta finished the year down 64%. Both stocks are up so far this year, with Snap up 38% and Meta up 56%. But the latest earnings reports from the two companies were received quite differently by investors: Meta shares soared after investors celebrated management’s cost-cutting plans, while Snap shares plunged after lower-than-expected results.

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In late January, Snap reported a fourth-quarter adjusted loss that exceeded analysts’ estimates. The company cited “macroeconomic headwinds, platform policy changes and increased competition” as reasons for its disappointing performance. Snap also expects these headwinds to continue in the current quarter.

Meta, on the other hand, told investors last week that it is focusing more on cutting costs and lowered its forecast for total expenses for the full year. Share Jump News.

Despite these contrary results, Salmon moved Snap above Meta on New Street’s Internet stocks list, and raised his price target on the Snapchat parent’s shares from $12 to $14. The analyst maintained his buy rating.

“Meta swapped positions with SNAP in our pecking order, largely due to the outperformance of the stock price,” wrote Salmon. He also raised his price target on Meta to $220 from $145 and maintained his Buy rating on the stock.

The decline in US engagement is a key risk for Snap, he added, adding, “We think revenue growth could rebound higher than the Street expects in 2023 (like Meta) with new ad products gaining traction, and profitability and margin expansion again.” are rising.”

Shares of Snap fell 0.7% to $11.99 on Tuesday. Meta stock was down 0.5% to $185.09 in recent trading.

Write to Angela Palumbo at [email protected]

Credit: www.marketwatch.com /

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