Brocker.Org: Snap underwriter Goldman Sachs defends social network as a ‘unique asset’ as shares crater


The research arms of Goldman Sachs and Credit Suisse, both underwriter firms of Snap’s initial public offering, told investors to focus on the long-term potential of the social media company and reiterated their buy recommendations on the stock in the wake of a very disappointing earnings season debut.

The company’s shares are down 21 percent in Thursday premarket trading after it reported disappointing first-quarter earnings results Wednesday after the market close.

Snap posted first-quarter sales of $150 million versus the Wall Street consensus of $158 million. It also reported daily active users of 166 million for the quarter compared 167 million expected by StreetAccount.

“While SNAP remains a near venture stage investment with all of the risks that implies, we continue to believe its audience and engagement represent a unique asset that will benefit from growth and diversification of internet usage and advertiser adoption as both mature,” Goldman analyst Heath Terry wrote in a note to clients Thursday.

Terry reiterated his $27 price target for Snap, representing 50 percent upside from Thursday’s pre-market trading levels.

In similar fashion, Credit Suisse told clients to appreciate how rare and special Snap is in the industry.

“Snap is a scarce asset that offers advertisers access to a coveted younger demographic,” analyst Stephen Ju wrote. “Our long-term investment thesis has not changed on the back of this report.”

Ju reaffirmed his $30 price target for Snap. The analyst noted there were positive aspects to the company’s report such as better-than-expected monetization of $1.81 average revenue per user (ARPU) in North America versus his $1.68 estimate. He cited how the North America’s ARPU was more than seven times Europe’s ARPU, a gap he predicts will shrink over time.

“Although we would certainly have preferred to have seen higher DAUs reported vs. our expectations and a higher reset to BOTH our revenue and Adj. EBITDA estimates, we settle for profit dollars for now,” he wrote.

Disclosure: NBCUniversal, the parent company of CNBC, is an investor in Snap.