Snap's Improved User Growth Leads to UBS Upgrade

Snap is upgraded to buy from neutral by analysts at UBS.
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Social media company Snap (SNAP) - Get Report was rising Friday after the stock was upgraded by analysts at UBS who are bullish on growth in 2019 and expect growth will persist in 2020.

UBS raised Snap’s price target to $24 from $16. The price target represents a potential 32% upside from the stock’s closing price Thursday of 

Despite the fact that the company’s shares have more than tripled since the stock hit its low in 2019, UBS analyst Eric Sheridan said this was good point for an upgrade for the stock.

“In our view, Snap remains an under-monetized platform against solid user growth & engagement and recent momentum with respect to ad budget allocations into 2020,” Sheridan wrote. “As a result, and reflecting upon our recent conversations with advertisers ahead of earnings and 2020 ad budget allocations, we gain increased confidence that Snap can deliver outsized revenue growth going forward.”

The firm estimated that Snap’s advertising revenue will grow at a 28% compound annual growth rate between 2019 and 2024, including a 39% increase year over year in 2020 and a 33% increase year over year in 2021.

For the current quarter, UBS expects revenue of $570 million, up from its previous estimate of $559 million, though it expects the same earnings per share loss of 10 cents. Wall Street is expecting Snap to report earnings of a penny on revenue of $562.13 million.

“While Snap's 12-month stock performance indicates a healthy level of investor optimism around Snap's forward operating performance, we believe expectations are still fairly conservative around Snap's monetization potential,” Sheridan wrote.