Snap Inc. (NYSE: SNAP) shares rose by 11.6% mid-day Thursday after its stock was upgraded due to its advertising sales.
BTIG analyst Richard Greenfield now recommends investors buy Snap shares because he believe that it stock price could soar as high as 50% within the next 12 months.
“Your initial reaction is likely why now and what changed, as virtually everything that could go wrong for Snapchat over the past couple years since going public has gone wrong,” Greenfield began. “Performance advertisers are laser focused on return on investment and spend (and spend more) where they see a compelling return.”
“We are increasingly confident that overseas direct response/performance advertisers are taking advantage of low relative bid prices on ad inventory in the U.S.,” he added.
In Snap’s previous quarter, the social media company crushed its estimates, which sent shares surging by 25%. Snap’s better-than-expected results were driven by its stronger advertising revenue.
Snap added features on its platform to help drive monetization such as 6-second non-skippable commercial ads, collection ads, product catalogs for e-commerce, and Snap Pixel. Snap also noted that it improved its machine learning model for app installs and lower-funnel bidding events, which also returned higher revenue.
Despite the loss of one million daily active users year-over-year, Snap’s revenue still grew by 36% year-over-year and earnings loss per share decreased by 65%. Also, Snap’s average revenue per user was USD 2.09, which was higher than estimates.
Snap is pouring its investments into its advertising business to help possibly turn the Company profitable. However, Snap’s decision to monetize its platform more is causing a decline in users, which is also concerning for many investors. Nonetheless, Greenfield sees upside for Snap’s stock price.
“The good news for Snapchat is that performance advertising can scale rapidly enabling meaningful revenue beats,” Greenfield added. “It is critical for Snapchat to convince higher quality brands of the performance ROI that can be found on the platform.”
Snap shares have now risen by 104.72% this year so far.