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Shares of Snap Inc. rose Friday after the company announced new features for the Snapchat app at an event held on Thursday, but Morgan Stanley does not know if the latest additions will bring more returns. Money to the struggling social media company.
Frames in brief
BREAK, + 4.96%
presented improvements to the company's augmented reality, games and content categories at Thursday's event, as Snap sought to engage its platform and compete with the company.
FB -0.17%
Instagram, which has copied some of its most popular features. Snap has struggled to increase the number of users on Snapchat since its IPO in 2017, posting stable sequential growth in December after two downturns.
The company is currently deploying the ability for users to play various games with their friends from Snapchat's chat platform, using the company's acquisition of Bitmoji in 2016, which allows the creation of animated avatars. Snap also announced new original programs and integrations with third-party applications.
"These should create opportunities for engagement, but the material monetization of this new commitment is not that simple," said Morgan Stanley's Brian Nowak, who assigns a $ 5.50 target to the action. underweight.
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Nowak is concerned that the games announced by Snap do not appear "turn-based", which "could limit ad impression opportunities." In games where one player makes a move and another follows, companies can naturally run ads after each move.
"The biggest challenge here is often the ability to create scalable ad blocks that do not disrupt the user experience," Nowak wrote.
Snap also plans to make it easier for third-party applications such as Netflix Inc.
NFLX, -0.65%
Fitbit Inc.
IN SHAPE, + 0.00%
and PayPal Holdings Inc.
PYPL, + 1.22%
to integrate with the Snapchat platform, but Nowak also sees barriers to monetization. "We're wondering about the scalability of this third-party ad network," he wrote, as the company battled Alphabet Inc.
GOOGL, -0.66%
GOOG, -0.65%
Google and its partners must probably offer very attractive terms to their partners to become a viable competitor.
Nowak is more optimistic about the eight new original shows discussed by Snap. He writes that the company is showing "resounding success" with his six-second non-jumpable commercials and has gained momentum for some of his shows last year.
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Ross Sandler, an analyst at Barclays, however, has an optimistic view of new features and their potential to generate revenue. "With respect to monetization, King uses similar" reward announcements "(six seconds after launching the program) and generates between $ 0.30 and $ 0.60 per dollar. [monthly active user], that we think Snap could easily get out of the door given his powerful stack of ads, "he wrote.
According to Sandler's calculations, if 87 million users test the gaming platform in the first year, if Snap can generate $ 1 per user, the product would increase Snap's revenue by 4%. He evaluates the overweight stock with a goal of $ 12.
Instant Stocks gained nearly 5% in Friday's trading. Although they have more than doubled (up 112%) so far this year, they have fallen 19% over the last 12 months. In comparison, the S & P 500
SPX, + 0.46%
has gained 15% since the beginning of the year and has grown by 8.5% over the past year.
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