Analyst Optimism Pushes Snap Shares Higher

For the first time since initiating coverage of Snap Inc SNAP's stock in 2017, BTIG is comfortable with a bullish stance despite multiple missteps over the past few years.

The Analysts

BTIG's Richard Greenfield upgraded Snap from Neutral to Buy with a new $15 price target.

Jefferies' Brent Thill maintained a Hold rating on Snap with a price target lifted from $9 to $11.

The Thesis

The bullish case for the parent company of Snapchat can now be made for five reasons, Greenfield said in the upgrade note.

First, a trend started in the third quarter of 2018 in which advertisers took advantage of low bid prices on Snapchat's platform in the United States. This trend "really picked up" in the fourth quarter and could translate to revenue growth in 2019 if trends hold up.

Over the past few weeks, Greenfield said the Discover section has undergone a shift away from "clickbait" type content towards more premium content. This suggests a favorable change was made in the underlying algorithm.

Snap's core younger group are unlikely to leave the platform even if frustrated. Merely maintaining the current U.S. user base and expanding internationally offers the potential for notable user growth.

First-hand checks on the revamped Android app on a Google Pixel 3XL is encouraging, especially in the Discover section which was previously "frustrating" to use.

Finally, 2018 was an "awful" year for Snapchat as morale hit all-time lows, but after several senior executive changes, Greenfield said the company now has a "clearer strategic road map."

Jefferies

Jefferies' Thill said the company is "not out of the woods yet" but recent upgrades and improvements are impressive and represents a "road to recovery."

The company still needs to introduce a new Android app, appoint a CFO who can "reset the bar," and increase advertiser density by demonstrating it can offer increasing ROI, Reuters quoted the analyst as saying.

Price Action

Shares of Snap were trading higher by more than 6.6 percent at $10.72 Thursday morning.

Related Links:

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

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