Snap (SNAP) Buys WaveOptics For $500 Million and Announces New Features to Drive Engagement and User Interactivity, Analysts Have Mixed Views

Snap Inc. (NYSE: SNAP) announced today a deal to acquire WaveOptics, a company that produces lenses for augmented reality glasses, the Verge reported. The deal is Snap’s largest ever as the company committed to pay $500 million in cash and stock.

The deal comes just a day after Snap presented a new version of its Spectacles smart glasses to push its shares higher. Moreover, the company announced new augmented-reality e-commerce products and new features for social media creators. All these products were unveiled at their 3rd annual Partner Summit.

Thomas Champion, a senior research analyst at Jefferies, reiterated a “top pick” view for SNAP as far as stocks in the Social advertising sector are concerned. The stock has an “Overweight” rating and an $83.00 per share price target.

“CEO Spiegel and CTO Murphy have a long-term vision for the app on which they continue to execute. We are impressed by their technical abilities in AR and ML, areas which advertisers will increasingly look to utilize. The opportunity in India is also interesting, with DAUs growing 100%+ y/y for the fifth quarter in a row. We come away from the Partner Summit impressed by Snap's ability to roll out new products, and it remains our top pick in Social,” the analyst said in a note.

BofA analyst Justin Post highlighted that the company’s management indicated its monthly active users (MAUs) have now surpassed 500 million (likely over 50% DAU/MAU ratio), while Spotlight has 125mn+ MAUs, Map has 250mn+ MAUs, and AR has 200mn+ daily users.

“We are encouraged at data showing solid user adoption across the Snap platform, while today’s announcements have further laid the groundwork for improving monetization. We continue to see strong execution across multiple products (initiatives from prior Partner Summits have become reality) and are constructive on Snap’s opportunity to increase revenue per user,” Post said in a memo.

Unlike Champion, Post says that he prefers “bigger cyclical beneficiaries with lower valuations and easier comps in 2H’21,” hence the “Neutral” rating on the stock alongside a $70.00 per share price target.

Shares of SNAP are up 0.6% today.

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