Updated from 10:59 a.m. with additional information.
Shares of Snap were gaining 2.3% to $19.99 on Monday afternoon after hovering around $19.50 a share late last week.
James Cakmak of investment firm Monness, Crespi, Hardt initiated coverage of Snap with a Buy rating and a $25 price target, saying that while the parent company has "more model risks than any initiation" they've had to date, Snap could still have a promising future ahead of it.
So far, Snap has six Sell ratings and three Hold ratings from Wall Street analysts.
"We recognize we are potentially giving too much credit for unproven skills in building a business, rather than just a product, but we see more to Snap than many suggest," Cakmak wrote. "There is substantial execution risk, but we're prepared to give the benefit of the doubt at this stage knowing what we know about Snap and knowing what we know about the efforts of its competitors."
Cakmak notes that it's "very easy" to lay out the bear case for investing in Snap: The company's path to profitability remains uncertain, it has a premium $20 billion-plus valuation and the launch of Facebook's (FB) - Get Report Instagram Stories has only exacerbated concerns around the fact that it faces "deep-pocketed competition."
Snap's complicated and restrictive non-voting share structure is also a cause for concern, Cakmak said, and could potentially lead to it being excluded from the S&P Dow Jones Indices and MSCI Inc. If Snap isn't included on a major index like the S&P 500, it could put further pressure on the stock.
Few analysts have advocated the bull case for investing in Snap and Cakmak said taking such a stance requires looking at Snap from a "35,000 foot view." Snap, which defines itself as a camera company, could eventually become a software-enabled portal to visual memories and communication, he added.
"Essentially, we see Snapchat as a portal...down the road as a leading portal into mobile video content and discovery," Cakmak explained. "Snap can become the equivalent to channel surfing with high impact short-form content from premium publishers, also being highly monetizable."
Snap could benefit from the decline in traditional pay-TV viewership by offering a differentiated mobile video experience with curated premium content, Cakmak noted. Alphabet's (GOOGL) - Get Report YouTube has become the leader for hosting mobile video, but Snap could carve out a spot in the market by building on its efforts to rethink how mobile content is delivered. The company has already done so with vertical video, Cakmak added.
Cakmak also shirked any comparisons of Snap to struggling social media company Twitter (TWTR) - Get Report , noting that beyond their similar counts of daily active users, the companies have little else in common.
"Snap recognizes exactly what it is and what it isn't," Cakmak wrote. "By declaration as a camera company to serve as the first channel of communication, there's the potential to capture increasing mindshare and displace second order services."
Among other large-cap internet stocks, Cakmak maintains Hold ratings on Facebook and Twitter, while he has a Buy rating on shares of Alphabet.