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- The hitch was up nearly 5% on Monday morning after receiving an upgrade to RBC.
- The report lists five reasons for the upgrade and indicates that Snap shares have upside potential of more than 40%.
- Watch Snap trade live.
The price of Snap shares will climb back to its initial offer price of $ 17 a share, according to a Wall Street badyst.
RBC research badyst Mark Mahaney said in a note sent Monday to his clients that the company's shares had a potential upside of more than 40%. He improved Snap to "outperform" and raised his price target to $ 17, the level at which stocks traded for the last time in March of last year.
The company went public in March 2017 at $ 17 per share. After a first rise, they have steadily fallen until the end of 2018 before bouncing back to more than 100% this year. Shares rose nearly 5% Monday morning, trading at nearly $ 12.40 each.
Mahaney's research note lists five reasons for upgrading it:
1. "Proof of stabilization in Apple iOS and traction in Android users":
Data from third-party vendors indicate that Apple's ranking of Snap apps has finally stabilized and its Google Play downloads have resumed.
Snap has also been facing a series of technical issues in its Android product that have been adopted in a limited way outside of the United States (the Android user base being more prevalent outside of the United States ). These problems have been largely solved, which could potentially contribute to the growth of these regions.
The average daily user growth has remained stable between 186 million and 187 million over the past year; However, continued progress in the development of the Apple and Android platforms should bring the company back to a steady growth trajectory.
2. "The upside potential of monetization that has existed for a long time can now be unlocked":
Snap's average user revenue has long been lower than Twitter's and Facebook's. Snap generates only one-third of Twitter's revenue per use and one-fifth of Facebook's revenue.
According to Mahaney, Snap has many levers to reduce the gap, including improved measures of the return on investment of advertisers and the promotion of its non-skippable advertising for the growing sector of premium content.
3. "Differentiation of long-standing products that can now be appreciated":
Copycat's innovations on Facebook's Instagram platform, including the discontinuation of the "Stories" feature, have long hindered Snap's position on the market. Whenever Snap generates a powerful product, Facebook simply copied it (bypbading costly and unsuccessful innovations).
Despite this, Snap may finally be able to differentiate its products in a sustainable way, as the use of social media is increasingly focused on private messaging, "said Mahaney. The application will accentuate this trend compared to competitors (strong in advertising) based on the news feed.
4. "Points to remember from the summit of the partners of the SNAP":
The first Snap Partner Summit, held in April, also convincingly demonstrated that the company was about to implement its differentiation strategy, according to Mahaney. Borrowing a product angle from Chinese social media applications, Snap is making a strong push into the multiplayer game. The company offers third party games as well as its own original content, the first game being the highly anticipated Bitmoji Party.
5. A point of potential inflection:
After a period of operational underperformance, which has weighed heavily on inventory, a renewed Snap product suite could propel the company into the following three critical areas: average daily user growth, gross margin expansion and operating losses. If Snap executes these financial measures, the stock should move closer to its $ 17 introductory price, a 40% premium to Friday's close, Mahaney said.
Snap has faced many challenges over the past two years, including strict cash compensation limits and the departure of nearly two dozen senior executives.
Snap was up 124% this year.
Insider Markets
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