Survey Shows Teens Still Love Snapchat (SNAP), Buy Hate The Ads - Aegis; PT Cut to $10

Aegis Capital analyst Victor Anthony lowered the price target on Snap Inc (NYSE: SNAP) to $10.00 (from $12.00) while maintaining a Hold rating following a survey of Long Island, NY high school students.

The survey showed that teens are highly engaged users of Snapchat. However, most of the teens (85%) dislike the ads that they are exposed to.

To wit:

"A survey of Long Island, NY high school students on a series of questions, reveal that the teens are highly engaged users of Snapchat. Copies of the surveys are available upon request. All plan to continue to use the app in College - key for Snap is to hold onto those users post college rather than let them switch to Facebook or Instagram. Approximately 80% cited Snap as their preferred social network with Instagram coming in second. Messaging beats out Stories and Discover as the most popular feature, and several cited the communications aspect of Snapchat as what they like
most about the app. This makes sense given that messaging apps are becoming more popular than the social networks themselves across the globe. But that's problematic because messaging monetization is lower than Stories and Discover. Most of the teens (85%) dislike the ads that they are exposed to. Some used the words "awful" and "annoying" to describe the ads. Not one teen purchased or encouraged their parents to purchase a product or service from an ad they saw on Snapchat. While the sample is small, it perhaps points to broader concerns for Snap if extrapolated out. If the audience dislike the ads and the ads are essentially ineffective, both Snap and the advertisers are not doing their jobs right. Unclear whether this points to a structural issue for Snap but it compounds what we see as a bevy of operational issues management is currently grappling with. App data points to continued weak user growth in 3Q (see charts) and advertisers cite better ROIs on competing platforms. We reduce our revenue estimates on Snap to below consensus and reduce our price target to $10 from $12."

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