After closing last week within cents of its all-time low, Snap Inc (Nasdaq: SNAP) stock sprang to life on Monday morning when a long-time Snap bear upgraded the stock. Snap’s Snapchat app redesign has been a major disappointment, but analysts say the company still has opportunities to get back on track growing and monetizing its user base.
On Monday, MoffettNathanson analyst Michael Nathanson upgraded Snap stock from “sell” to “neutral” and said Snapchat’s user growth could surprise to the upside.
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Nathanson isn’t particularly bullish on Snap stock, but says his bearish opinion of Snap stock is is now fully reflected in its sub-$11 share price.
“We worry that as Snap reverses that ill-conceived redesign, user growth will improve, which could help the [bullish] narrative,” Nathanson wrote in the upgrade note, according to CNBC.
Snap stock is down more than 23 percent since the company reported first-quarter revenue and user count numbers that fell well short of expectations. The report marked the first financial update from Snap since it implemented its controversial Snapchat app redesign, which many analysts say did more harm than good.
But with expectations for Snap now as low as ever, Nathanson says the company has a number of potential catalysts coming in the near-term that could get the stock back on track.
“Several factors could potentially improve Snap’s situation throughout the year, including the redesign of the app redesign, completion of the shift to a programmatic advertising model, launch of the new Android app and a leaner organizational structure,” Nathanson says.
Bank of America analyst Justin Post says Snap’s recently announced CFO change signals the company could also be taking a more aggressive approach to its finances.
“Our recent enthusiasm on Snap Ads’ programmatic upside potential and Android app improvements was undermined by challenges related to the app redesign (fixes being tested but Android improvements delayed) and headwinds from the Lenses/Filters business transition,” Post says.
Post says Snap could do itself a big favor by presenting a clear, long-term financial model so investors can see a path to profitability.
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“We continue to see opportunity to generate significant increases in per user monetization, while internet media comps suggest Snap’s model has very positive margin potential,” he says.
In addition to the “neutral” rating, MoffettNathanson has a $9 price target for Snap. Bank of America has a “buy” rating and $15 target for SNAP stock.
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Snap Inc Stock Is Finally Showing Signs of Life originally appeared on usnews.com
