Snap declines after JMP cuts ratings, citing a decrease in time spent in the US

As JMP Securities downgraded the social network and camera startup on Tuesday, citing a fall in time spent in the U.S., Snap (NYSE:SNAP) shares dropped by about 2% in premarket trade.

The firm's recommendation for Snap (SNAP) was cut from market outperform to market perform by analyst Andrew Boone, who noted that the decrease in app usage is probably a "direct consequence of heightened competition" from Meta Platforms' (META) Reels and YouTube's (GOOG) (GOOGL) Shorts.

Boone, noting competition from Reels, YouTube Shorts, and TikTok, said that time spent on Snap in the United States decreased 7% year over year in the fourth quarter, a 7 point drop from the third quarter.

Boone stated in a note to clients that "importantly, these are Snap's most monetizable surfaces as we estimate impression growth to be under pressure going forward."

Boone continued, "Apple's (AAPL) Identifier for Advertisers modification to iOS is still having an effect on advertisers' targeting and attribution, certainly having an influence on ad expenditures on Snap (SNAP), and likely driving them to mid- and upper-funnel objectives."

As a result, Boone said, "impression growth faces challenges, and macro poses additional negative risk given that we are currently forecasting revenue that is 4% below consensus."

The analyst went on to say that improving Spotlight and pushing for suggestions could reduce the company's gross margins due of the high computational costs involved.

As spending on the platform increased just 2% year over year and Snap (SNAP) had a "limited" presence at the Consumer Electronics Show last week, investment company Truist advised caution.

On Snap, analysts are generally circumspect (SNAP). Wall Street analysts rank it a HOLD, and authors of Seeking Alpha give it a HOLD rating. In contrast, SNAP receives a HOLD rating from Seeking Alpha's quant system, which routinely outperforms the market.