Snap's user trends are 'not encouraging'
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- Snaps user trends are declining around the world during the third quarter.
- This negative trending could weigh on the company's other strategies and advertiser's ability to scale their campaigns, says Jefferies.
- Watch Snap trade in real time here.
Snap user trends are tumbling in the third quarter, capping the company's efforts to improve the Android experience and advertiser's ability to scale their campaigns, according to Jefferies.
"Daily average users amd time spent are both trending down in the third quarter in the US, UK, Spain, France, Germany, and Australia based on our third-party data analysis of Android usage," Jefferies analysts Brent Thill and Brian Fitzgerald said Wednesday in a note titled "User Trends Not Encouraging - A Look at the Data."
Thrill and Brain noted that Snap's position as a social-media platform depends on the need for users to have multiple friends who use it. That means if users turn to other platforms such as Instagram, it could cause "a negative flywheel" for Snap.
Snap's negative user trends could also weigh on the company's other strategies and advertisers' interests, the analysts said.
"Snap has been re-building the Android experience to help fuel the next leg of user growth in Android dominated geographies for the past year, but has yet to release a full product," they wrote, adding that the company's efforts to improve the Android experience is hard to come soon due to the difficulty to retain users on the platform.
They also questioned "how long advertisers will stick around if users are not" as Snap's sponsors could be limited in the ability to scale their ad campaigns if users and time spent continue to decline.
Jefferies analysts said the recent exit of Snap's two executives is "troubling" given that the company is still in the early stage of its business transition.
The social-media company said Monday that Imran Khan, its chief strategy officer, will be leaving the company, but will continue to serve in his current role to help with the transition. Company insiders told Business Insider they were not sorry to see Khan go, as "he had no ad or media background" and was not a "good fit in that strategy role."
The company's first CFO Andrew Vollero also stepped down this year, with Tim Stone, a 20-year veteran executive from Amazon, sliding into the role.
"We appreciate the recent increase in communication from new CFO Tim Stone (guidance was welcome) but question why senior leaders would leave amidst the business transition," the analysts said, while trimming their price target to $11 from $14 and keeping their "hold" rating.
Snap shares have been under pressure since last month, when the company reported quarterly results that beat on the top and bottom lines but said its number of daily active users fell 2% to 188 million, missing Wall Street estimate of 193 million.
Also on Wednesday, BTIG analyst Rich Greenfield issued a "sell" rating on Snap and dropped his price target to $5, according to Bloomberg.
Snap shares are down 37% this year through Tuesday.
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