3 New Initiatives From Snapchat Create 'Opportunity' To Drive Usage

Social media company Snap Inc SNAP detailed three new initiatives at its inaugural Partner Summit for developers that present an "opportunity" for usage and engagement growth, according to Bank of America Merrill Lynch. 

The Analyst

BofA's Justin Post maintains a Neutral rating on Snap's stock with a price target lifted from $10 to $12.

The Thesis

Snap announced the following growth initiatives, Post said in a Friday note:

• The integration of photos and videos with third-party apps like Tinder.
• A mobile gaming platform.
• New augmented reality features.

The company also announced a lineup of 10 new original shows that will be available on the Discover Page.

The company's multiple new offerings could help improve engagement by turning Snap's core communication users into viewers of its content, the analyst said. While this could translate to higher monetization rates — especially among the 13-24 age group — the company will still face "significant" competition from rivals like Facebook, Inc. FB's Instagram, he said. 

The bigger takeaway from Snap's event is that the company transitioned from a "more guarded and closed company" to one that's "more open" with its content and advertising partners, Post said. The new image is likely to result in new users and usage growth, but is unlikely to resonate well with users over 40, he said. 

Instagram has a tendency to mimic Snap's winning initiatives, and there is no reason to believe it won't do so again, according to BofA. 

Price Action

Snap shares were rallying by 6.43 percent to $12 at the time of publication Friday. 

Related Links:

Is Snapchat's Stock A Buy After Stabilizing Its User Base? The Street Debates

Guggenheim: What Snap Investors Need To Know About Instagram, Android And Advertising