Snap (NYSE:SNAP) shares skidded as JMP Securities downgraded the company to market perform from market outperform, citing declining time spent on Snap and increased competition from Reels and YouTube shorts.
According to Sensor Tower, Analyst Andrew Boone noted that time spent on Snap in the U.S. fell 7% year-over-year in the fourth-quarter, a seven-point decline from the third-quarter, citing competition from Reels, YouTube Shorts as well as TikTok.
"Importantly, these are Snap's most monetizable surfaces as we expect impression growth to be pressured looking ahead," Boone wrote in a note to clients.
Boone added that Apple's (NASDAQ:AAPL) Identifier for Advertisers change to iOS is still impacting advertisers' targeting and attribution, likely impacting ad budgets on Snap and causing them to go to mid and upper-funnel objective.
"To that end, impression growth faces headwinds while macro represents additional downside risk as we are 4% below consensus for 2024 revenue," Boone added.
The analyst added that if Snap were to push into recommendations and improve Spotlight, it could lower the company's gross margins, citing the heavy computing cost needed to do so.
Last week, investment firm Truist was cautious on Snap as spend on the platform grew just 2% year-over-year and had a "limited" presence at the Consumer Electronics Show .
Analysts are universally cautious on Snap. It has a Hold rating from Seeking Alpha authors , while Wall Street analysts rate it a Hold .
Conversely, Seeking Alpha's quant system, which consistently beats the market, rates SNAP a Hold
SNAP shares fell 27 cents, or 2.7%, to $9.54.
