Guggenheim Upgrades Snap, Says Long-Term Revenue Potential Is Underappreciated

Snap Inc SNAP ticked higher on Tuesday after receiving an upgrade.

The Analyst

Guggenheim analyst Michael Morris upgraded Snap from Neutral to Buy with a $22 price target.

The Thesis

Morris says Snap is well positioned to outperform Guggenheim’s Internet and Media coverage universe through the year end and provide a return of nearly 30% over the next 12 months.

“The combination of strong usage trends, industry-leading access to 18-34 year-old users and platform improvements should drive growth in advertiser demand,” Morris wrote in a note.

The analyst says long-term revenue potential at Snap is the most underappreciated in the firms coverage universe, and should support a sustained premium valuation multiple.

Morris believes third-quarter usage trends remained strong, and says platform usage mix continues to shift to monetizable areas, including discover and games.

Morris also believes Snapchat’s unique value proposition for advertisers should drive momentum through 2020 and beyond, and sees several reasons in the mid- to long-term for why the company can continue to grow advertising revenue at a rate that exceeds consensus expectations and supports share appreciation.

Price Action

Snap's stock traded higher by 0.7% to $17.24 at time of publication. Shares hit an intraday high of $18.08 earlier in the session.

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