Shares of Snap Inc (NYSE:SNAP) rose 3% in premarket trading Friday after Deutsche Bank (DB) analysts upgraded the stock’s rating from Hold to Buy, citing several strong catalysts anticipated to drive upward revisions in SNAP's revenue and EBITDA.
Key factors contributing to DB’s optimistic outlook include the expected revenue boost from Snapchat+, at platform rebuild, Snap’s partnership with Amazon (NASDAQ:AMZN), and the inbound advertising from China.
“Recent ad checks give credence to a successful ad platform rebuild at SNAP, evidenced by growing purchase-related conversions, which, we believe supported a second sequential quarter of ad-spend acceleration from 3Q23 to 4Q23, and potentially a continued acceleration into 1Q24,” analysts wrote.
The bank sees a promising growth path for SNAP, with easier year-over-year comparisons and a boost from Snapchat+ revenue.
However, they caution about competition from TikTok and the potential impacts of SNAP's shift towards more lucrative users, which might slow down user growth.
“That said, we increase our 2024/25 revenue and 2024/25 EBITDA estimates by 5%/6% and 38%/20%, respectively,” the note says.
Along these lines, the team raised the target price for SNAP from $10 to $19, implying over 17% upside from Thursday’s closing price.