Has Snap's Stock Finally Bottomed?

Shares of Snap rose on Monday after an analyst note suggested that its advertising outlook may be improving.

Author:: Annie Gaus
Publish date:: Jan 15, 2019 7:29 AM EST

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Have Snap shares bottomed out?

Shares of Snap (SNAP) - Get Report rose 0.48% Monday after analysts at Citigroup raised its rating to neutral, citing an improving outlook by advertisers, who are "generally optimistic about the outlook for the platform," wrote Mark May. May also noted a forthcoming Android redesign and a decline in operating costs as reasons for upgrading the stock to $7 per share, above its current level of $6.31 per share.

Likewise, Cowen's John Blackledge wrote in a note to clients on Jan. 10 that "Snap's valuation is a bit more reasonable," given a significant share decline since last year.

However, whether this presents a buying opportunity is a matter of some debate.

Gone are the days when Snap was considered a worthy competitor to the much larger Instagram, which is owned by Facebook (FB) - Get Report .

But given its young-skewing audience, some investors believe there's still room for Snap to establish itself as a "solid niche platform," in the words of Pivotal's Brian Wieser. In a note to investors last week, Wieser noted that user growth has resumed followed declines in 2018 pegged to a widely-disliked Snapchat redesign, and a transition to programmatic advertising: "The shift to selling advertising programmatically is opening up Snap to a wider range of customers, which builds on the company's expanded international efforts to sustain ad revenue growth above global averages for the foreseeable future," he wrote.

Nonetheless, employee churn remains a notable risk to Snap investors, according to Wieser. The social media firm has shed a number of high-ranking employees in recent months, including its influential former strategy chief, Imran Khan. And any concerns about employee churn were again validated on Monday, with a report from Business Insider that the company's head of HR, Jason Halbert, is leaving the company. Snap didn't immediately respond to a request for comment.

Since going public in March 2017, Snap's stock has fallen about 76%, leaving some to speculate that the languishing firm could be ripe for a buyout. Despite this, CEO Evan Spiegel has said that he plans to keep Snap independent.

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