Yahoo Finance Snap analyst: 'I don't know how people can feel comfortable' holding the stock
Though other big names in tech are on the upswing after a tough ride last year, Snap (SNAP) still faces issues that are clearly giving investors pause.
"To be honest, I don't know how people can feel comfortable [holding Snap]," Scott Kessler, the Third Bridge global sector lead for tech, media, and telecom (TMT), told Yahoo Finance Live (video above).
Kessler, who does not have an official position on the stock, as Third Bridge does not provide Buy/Sell/Hold ratings, added that "I think it's appropriate to kind of wait and see in terms of what the company has to say. To be able to truly execute, they need to be able to get their advertising technology and platform in place."
Snap, which owns the social media platform Snapchat, beat expectations in its Q2 earnings on Tuesday but offered weak Q3 guidance, sending shares into a decline of more than 17% in after-hours trading.
Snap stock is up nearly 20% so far in 2023 despite being down about 18% over the last five trading sessions. Overall, the stock has struggled mightily since its September 2021 peak.
"I feel like I've seen this movie at least once or twice before, where Snap essentially is indicating there are some challenges," Kessler said. "These challenges could be coming from the macro backdrop, could be coming from the fact that they've been overhauling their ad and technology platform or the fact it's a very competitive market."
In terms of the platform, the analyst added, there is an ongoing cost to figuring things out.
"They've already embarked on this spending, so they can't just stop midstream," he said. "Nonetheless, I do think it's reasonable to ask: 'When is this going to be done, and when are you going to start being able to flip the switch and really capitalize on the investments that they've been making for a number of quarters at this point?'"
Eventually, that pressure leads to questions about company leadership.
"I think sometimes with Snap, it seems like there's lack of urgency coming from company leadership," Kessler said. "We clearly saw that urgency when the company announced a pretty massive restructuring last August, but, since then, I think people are kind of wondering when the benefits of that restructuring are really going to manifest themselves."
All that said, according to Kessler, there's still an opportunity to benefit from the ongoing restructuring project.
"The company would be well-advised to hopefully indicate that they're in position to relaunch the ad platform so that they can really benefit from what historically has been a really strong period for them — and that's the holiday shopping season."
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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