Snap Extends 2019 Surge With Analysts More Confident in Rebound

(Bloomberg) -- Snap Inc. shares jumped on Tuesday, extending a multi-month surge that has seen the stock nearly triple in value as analysts grow more confident that the social-media company is in the middle of a turnaround.

The stock jumped as much as 9% and was trading at its highest level since April 2018. Shares have gained more than 190% off a December low.

Tuesday’s rally was fueled by BTIG raising its price target by $5 to $20. The move was just the latest reflection of the firm’s growing confidence in the company, which is known for its Snapchat social-media app. BTIG upgraded Snap to neutral in December, and then to buy in March, and now its target is the highest on the Street.

There are “far too many investors” ignoring the company’s recovery, analyst Richard Greenfield wrote, adding that his own conviction “has meaningfully increased” since March. He listed eight catalysts that could extend the rally, including a “more open approach to third-parties” and higher daily active users, and lamented that consensus expectations for user growth and revenues/Ebitda “are simply too low.”

Snap’s 2019 rally picked up steam in early February, when its fourth-quarter results beat expectations and it pointed to a stabilizing user base. An additional leg up followed in April, when it announced a suite of new products and services, including a video-game business.

One of the most significant catalysts came after Chief Executive Officer Evan Spiegel said a highly anticipated Android redesign would be fully rolled out by the end of the year, news that helped assuage concerns over user engagement.

“With the Android rebuild stunting user growth for much of 2018, the launch of the updated app is supporting a resurgence in Android users,” Jefferies analyst Brent Thill wrote on Tuesday, citing an analysis of Android data for April and May. “Positive user growth in 1Q has continued into 2Q and time spent on the platform is relatively stable.”

Jefferies has a hold rating on the stock, writing that “improvements may already be priced in” and that it was waiting for a better entry point to turn more positive.

On Monday, Aegis Capital Corp upgraded Snap to buy from hold, in what the firm noted was the first time it had recommended the stock “since our pre-IPO initiation work, when we were skeptical of Snap’s ability to drive user growth.” Now, analyst Victor Anthony sees fundamentals improving to the point that he no longer thinks Spiegel should find a buyer for the company.

“Snap can stand on its own,” he wrote.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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