Investors are eagerly awaiting more updates about Snap’s (NYSE: SNAP) new subscription service called “Snapchat Plus.”
New Features Will Be Available
Yesterday, media reports surfaced about Snap testing a new paid subscription-based plan dubbed Snapchat Plus, which is set to provide early access to exclusive new abilities and features.
App researcher Alessandro Paluzzi tweeted additional information about Snapchat Plus, saying the company is testing features such as the option to pin one of your Snapchat friends as your “#1 BFF”, access to exclusive Snapchat icons, see who rewatches your stories, learn friends’ whereabouts in the past 24 hours, display a profile badge, and more.
According to Paluzzi, Snapchat Plus is currently priced at $4.84/month and $48.50/year, though those could be just placeholder prices.
Snap’s decision to launch a paid tier is the latest in a series of similar moves made by social media and ad companies – with messaging app Telegram also recently confirming it is working on its own premium subscription plan, while Twitter launched its Twitter Blue feature in late 2021.
Snap and its competitors have been exploring new ways to drive revenue, particularly after Apple introduced significant changes to the privacy settings of its iOS, which now allow users to switch off ad tracking – a move that significantly affected advertisers, including Snap.
The company said iOS changes are one of the reasons why it failed to meet revenue targets and decided to slow down hiring in 2022.
Late last month, Snap told investors it will fail to meet its revenue and adjusted earnings per share (EPS) targets in the current quarter, sending the social media company’s shares down 43% on the day.
“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” Snap wrote a filing to the U.S. Securities and Exchange Commission (SEC).
The company’s stock remains down more than 80% this year.
Snap’s warning to investors also dragged down shares of peers such as Meta, Roku, Alphabet, and Twitter, as well as ad tech industry leaders including Magnite, The Trade Desk, and PubMatic, among others.
Snap’s guidance cut comes as concerns around inflation hiked interest rates, supply chain constraints, and geopolitical tensions urged ad companies and brands to ease ad spending in the quarter. As a result, Snap and its peers slowed down or halted hirings in a bid to reduce costs.
In April, Snap said it expected Q2 revenue growth to be in the range of 20% to 25%, and adjusted EBITDA to range between 0 to $50 million. Following the guidance update, the owner of Snapchat said it now expects revenue growth to be below 20% and an adjusted EBITDA loss.
CEO Evan Spiegel said Snap will hire 500 more people in 2022, compared to the 2,000 the company hired over the last 12 months. Spiegel added that Snap’s executives have been asked to “review spending to find additional cost savings.”
What are Analysts Saying?
UBS analysts maintained SNAP’s Buy rating, but slashed the price target for the stock from $45 to $17 per share. Recently, analysts at Goldman Sachs also maintained their Buy rating for Snap’s shares, but reduced the price objective from $60 to $25 per share.
According to MarketBeat.com, SNAP currently has a consensus rating of Buy and an average price target of $33.80, suggesting a potential upside of more than 176%.
Analysts at Morgan Stanley said they expect all online ad companies to be affected by the sharp consumer pullback.
“Advertising is cyclical,” the analysts said.
On the other hand, Evercore ISI analysts “see no real reason to not take Snap’s negative pre-release at face value.”
“Digital advertising is cyclical, but like all advertising, and Macro headwinds are very likely getting much harder,” they wrote in a client note.
Snap is reportedly testing a new subscription service with the goal of accelerating its revenue growth. Tightening financial conditions, as well as TikTok’s rapid ascendance, crushed its shares in recent months.