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Spotify and Snap Get Upgrades From Guggenheim

Spotify, Snap and other internet companies appear to be undervalued, according to a Guggenheim analyst.

Internet companies appear to be undervalued, according to a Guggenheim analyst, who on Monday upgraded Snap  (SNAP) - Get Snap, Inc. Class A Report to buy from neutral and Spotify Technology  (SPOT) - Get Spotify Technology SA Report to neutral from sell. 

Snap, parent company of Snapchat, was climbing 3.9% to $25.62 at last check, while audio streaming services company Spotify was advancing 1.1% to $238.53.

Guggenheim analyst Michael Morris raised his price target for the stock of both companies, increasing Snap to $28 from $22, while boosting Spotify to $250 from $232.

Morris said in a note to investors that he had revised his valuation framework for digital media companies to better reflect what he believes to be greater similarities between internet and software companies, according to The Fly.

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This includes core investment in R&D and engineering resources and the creation of high-utility technology platforms.

Morris said he believes that at the core, internet companies are software development and distribution companies that largely focus on consumer rather than enterprise applications and he expects investors will continue to evolve their view to reflect this, which will drive incremental appreciation for internet stocks.

The analyst said that “investors in general underestimate the long-term advertising market growth potential,” as well as “the sustained revenue and profit growth potential” of internet stocks."

In addition to Spotify and Snap, Morris also raised his price targets on such internet marquee names Facebook  (FB) - Get Facebook, Inc. Class A Report, Google parent Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report, Roku  (ROKU) - Get Roku, Inc. Class A Report, Netflix  (NFLX) - Get Netflix, Inc. (NFLX) Report and Twitter  (TWTR) - Get Twitter, Inc. Report.

Guggenheim also started coverage of Pinterest  (PINS) - Get Pinterest, Inc. Class A Report with a buy rating and a share price target of $48.