Shares of the Santa Monica, Calif.-based Snap were down 3.9% to $41 .48 in a broad market swoon.
Analyst Michael Morris, who maintains a buy rating on the shares of Snap, raised the price target on the stock to $52 from $36.
"We have updated our model and valuation on Snap to reflect our greater confidence in the company’s long-term revenue and cash flow growth potential," Morris said in an investors' note.
Specifically, Morris said, he believes Snap "is in the early stage of a virtuous cycle that leverages the company’s technology to drive higher user engagement and satisfaction, improved advertiser ROI on a global basis, and expanded content partnerships."
Last week, Snap reported a narrowed third-quarter loss and surprised Wall Street investors by posting an adjusted profit. Revenue rose 52% to $678.7 million from $446.2 million, boosted from the July boycott of Facebook (FB) - Get Facebook, Inc. Class A Report by key advertisers.
Daily active users rose 18% from a year earlier to 249 million.
CEO Evan Spiegel said that "the adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us."
Morris cited this in his note, saying that he believed Snap "also offers advertisers industry-leading full-funnel advertising opportunities, particularly for younger audiences and through the use of augmented reality (A/R) functionality for product engagement."
"While e-commerce will likely be the primary market focus through the holiday shopping season, we see full-funnel marketing as a leading market-wide initiative into 2021 and see Snap in a leadership position to gain market share," Morris said.