Snap is an 'attractive candidate to go private' if management can't reverse its usage trends, analyst says
- Snap shares rallied Friday after receiving an upgrade from Pivotal Research.
- The stock's current price makes the company an "attractive candidate to go private" if management can't reverse its usage trends, Pivotal Research said.
- Shares have lost more than 60% of their value since Kylie Jenner tweeted her displeasure with the Snapchat app's redesign in February.
- Watch Snap trade in real time here.
Snap shares rallied as much as 8.5% Friday after receiving an upgrade at Pivotal Research, who said the company is an "attractive candidate to go private" if its management is unable to reverse its current usage trends.
"Our take is that it is not too late for management to find ways to reverse recent usage trends and generally improve monetization regardless of those usage trends," Pivotal Research analyst Brian Wieser said in a note sent out to clients on Friday.
"If they are unable to do so in the near term, the company could become an attractive candidate to go private with the stock's price at current levels."
Snap's stock has gotten whacked this year, plunging more than 60% since February - after Kylie Jenner's infamous tweet blasting the Snapchat app's redesign. Selling has since wiped out $13 billion of market value.
The redesign, which has been unpopular among users, led to another problem - a declining user base. The company said in its second-quarter earnings release, on August 7, that it suffered its first-ever decline in sequential daily active users. Shares have plunged more than 45% since those results were announced.
The app maker has been constantly introducing new features, but that has been unable to lift shares.
Last month, Snap introduced a new feature called Visual Search, which allows users to point the app's camera at shoes, jackets, and other products to find them on Amazon and buy them. Shares fell 2% that day.
Similarly, shares dropped 4% when Snap introduced two new styles of its Spectacles camera glasses.
And on Wednesday, Snap launched its new scripted shows, called "Snap Originals," but shares dropped more than 3% - to a record low of $6.45 apiece.
But Pivotal Research says all of the negative news has now been priced in, and shares are set to rebound. That caused the firm to upgrade Snap to "buy" from "hold." The firm did however lower its price target from $9 to $8 - 12% above where shares are currently trading.
Snap was down 52% this year.
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