Shares of Snap (SNAP) are on the rise on Thursday after both Jefferies and Cowen upgraded the stock to Buy-equivalent ratings. Jefferies analyst Brent Thill told investors that he believes Snap can accelerate user growth, particularly from international markets, while his peer at Cowen cited a rebound in fundamentals, a positive survey from ad buyers and branding trends.
USER GROWTH: In a research note to investors, Jefferies' Thill upgraded Snap to Buy from Hold and raised his price target on the shares to $21 from $17. With Augmented Reality lenses, the rebuilt Android app, and local language investments strengthening the ecosystem, he believes Snap can accelerate user growth, particularly from international markets. The analyst also said that the company's monetization is "too low" relative to peers and predicts ad revenue can double over three years. Meanwhile, he expects Snap to be non-GAAP profitable by fiscal year 2020.
SURVEY SAYS: Also more bullish on the stock, Cowen analyst John Blackledge upgraded Snap to Outperform from Market Perform and raised his price target on the shares to $20 from $16, citing a rebound in fundamentals, a positive survey from ad buyers, and branding trends. His 2020 Ad Buyer Survey showed continued ascent for usage of Direct Response ad products, and momentum around branding campaigns as 10% of ad buyers would use Snapchat to start a new branding campaign for 13-34-year-olds on an overall average basis. The analyst also noted that 6% of ad buyers said they view Snapchat as a platform that could emerge or is emerging as a meaningful part of their Digital spend outside of Alphabet (GOOG) and Facebook (FB) properties. Additionally, ad pricing appears to be stabilizing per survey respondents, Blackledge pointed out.
THIRD UPGRADE IN LESS THAN A MONTH: Last month, JMP Securities analyst Ronald Josey also upgraded Snap to Outperform from Market Perform with a $20 price target. The analyst said he was "incrementally confident" in Snap's ability to grow its user base, increase engagement, and improve overall monetization as the service attracts more advertisers and share of advertising budgets. Snap "is now more stable than it was when entering 2019," Josey contended, adding that Snap is well positioned to continue to add daily active users and "close the monetization gap" with other major social networks as its sales force reorganization is done and it launches new advertising products.
PRICE ACTION: In morning trading, shares of Snap have jumped over 6% to $17.68.
