4 Things This Tech Analyst Likes About Snap

Snap Inc SNAP is higher by more than 20 percent since the start of 2018, although it has lost some buying momentum since its fourth quarter report in early February. Some Wall Street analysts continue to hold a bearish stance on the stock, but have identified some encouraging data points.

The Analyst

Needham's Laura Martin maintains an Underperform rating on Snap's stock with no assigned price target.

The Thesis

There are at four three aspects of the business for investors to appreciate, Martin said in a note. These include:

1. Changes to Snap's social media app, Snapchat, is attracting users outside of its core 13 to 34 demographic age group;
2. The company's ongoing expansion into "tier 2" markets;
3. Improvements to the Android app; and
4. Upside in CPM as the company's programmatic shift is mostly over.

The bearish case on Snap's stock remains unchanged, however, as Martin said the stock's valuation of 20 times fiscal 2018E sales is "priced for perfection.

Growing users beyond the 13 to 34 "advertiser's dream" age segment could alienate the core base, and Martin also said it's difficult to prevent rival social media platforms from copying its best ideas.

Price Action

Shares of Snap were trading higher by more than 3 percent Friday at $17.85.

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