Snap (SNAP) - Get Snap, Inc. Class A Report earned its second Buy rating on Tuesday afternoon, with Drexel Hamilton joining the young social media company's lone bull, who gave Snap its first-ever Buy rating one day earlier.
Drexel analyst Brian White initiated coverage of Snap with a Buy rating and a $30 price target -- the highest price target assigned to Snap thus far -- based on his belief that the ephemeral message app Snapchat has huge sway over millennials, the most desirable, largest and toughest-to-reach demographic for advertisers. Snap currently has six Sell ratings and three Hold ratings from Wall Street analysts.
Shares of Snap rose 2.3% to $20.38 on Tuesday, and were up an additional 5% in morning trading on Wednesday.
"We view Snap as a platform for the imagination that unlocks the creative juices of its users and allows for uninhibited expression to be shared with friends," White wrote. "Moreover, Snap is making more original content available to its user base."
White compared Snap to Action Alerts PLUS holdingApple (AAPL) - Get Apple Inc. (AAPL) Report several times throughout the note, saying that like the Cupertino, CA-based tech giant, Snap is built around a culture of "working hard to develop great products for their customers," and even drawing parallels between the fact that Apple was founded by longtime friends Steve Wozniak and Steve Jobs, while Snap co-founders Evan Spiegel and Bobby Murphy were fraternity brothers at Stanford University.
Significantly, Snap has taken steps to enter the augmented reality market with the launch of Spectacles and virtual reality "lenses." Both products could spell major monetization opportunities with advertisers later on down the line, White added. The company has already fostered more daily user activity on its platform by releasing sponsored lenses with advertising partners like Mountain Dew, the NBA and Under Armour (UAA) - Get Under Armour, Inc. Class A Report .
On top of that, White noted that Snap has already demonstrated it can disrupt traditional communications methods by promoting image-first messaging in the Snapchat app, despite being considerably smaller than rivals such as Facebook (FB) - Get Facebook, Inc. Class A Report , which has garnered some criticism recently for copying Snapchat features with Instagram Stories. The latter is widely believed to have captured some users from Snapchat Stories in Snapchat's fourth quarter, contributing to a slowdown in new user growth.
"Snap is a different type of technology company that competes with a wide array of competitors and we believe investors should not try to pigeonhole the company into one particular industry segment," White explained.
The company also has the potential to spread its "pixie dust" overseas to markets like Asia as more and more consumers there enter the middle class and buy phones with 4G network coverage, as well as attract older generations in the coming years. Skeptics have argued that Snap's user base is limited to millennials and that the company may have already saturated the 18-to-24 age group.
Several analysts have attributed their bearish stance on Snap to the company's questionable fundamentals, such as the fact that the company has yet to become profitable.
But White said he's not deterred by Snap's $20 billion-plus valuation, saying that the company shouldn't be pigeonholed as simply a social media company like Facebook or Twitter (TWTR) - Get Twitter, Inc. Report.
"Snap delivered the fastest revenue growth of any company in our coverage universe in 2016 and we expect this to continue in 2017," White said. "Given the high revenue growth rates that we expect from Snap in the coming years, we believe the stock is attractively valued for healthy upside potential."