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Snap Inc.’s new growth targets and plans to dramatically expand the revenue potential of its various features drew praise from analysts Wednesday.
The social-media company forecast at its Tuesday investor day that it could drive at least 50% revenue growth for multiple years, a projection that helped swing Snap’s SNAP, +0.33% stock into record territory Tuesday and drove praise from analysts Wednesday.
Shares are off 0.4% in morning trading Wednesday, after soaring 11.1% to a record close of $70.45 on Tuesday.
“Snap has gotten healthier from the pandemic with an accelerating product pipeline, diverse advertiser demand, a well-developed self-service ad platform, and a larger engaged audience,” wrote MKM Partners analyst Rohit Kulkarni, who also hinted at the rarity of a $100 billion dollar company setting out to grow revenue at 50% annually.
He has a buy rating and a $83 price target on the stock, up from $65 prior to the event.
See also: Snap stock gets an upgrade on revenue potential of short-form video
Wells Fargo analyst Brian Fitzgerald wrote that the 50% target “by any reasonable interpretation would significantly exceed our prior forecasts and pre-event consensus” and argued that Snap “has enough runway in its five key platforms (Stories, Camera, Spotlight, Map and Communications) to achieve its outlook.” He has an overweight rating on the shares and boosted his price target to $91 from $67.
Fitzgerald highlighted management’s upbeat tone on the revenue opportunities across its products. Snap users open the Snapchat app 30 times a day on average, for example, and the “vast majority” of users engage with Snap’s augmented-reality tools, some of which are sponsored by advertisers.
“We believe the camera will be a multibillion-dollar platform and that augmented reality represents our most exciting long-term opportunity,” Chief Financial Officer Derek Andersen said during the investor day presentation.
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For MoffettNathanson analyst Michael Nathanson, the presentation validated his bullish January upgrade of Snap’s stock. He titled his note to clients: “They Are Who We Thought They Were.”
Nathanson keyed in on a comment from Chief Executive Evan Spiegel a year back, when he told investors that Snap would have to grow annual revenue by more than 50% for several years to approach Twitter’s level of average revenue per user, something Spiegel deemed possible at the time.
“What seemed like a possibility before the COVID-19 pandemic now seems like a realistic target given the momentum in their business,” Nathanson wrote, while boosting his price target on the stock to $80 from $61.
Bernstein’s Mark Shmulik called Snap’s investor day “flawlessly executed” and said that the event made him “incrementally confident on Snapchat’s march towards super-app status and beyond.”
Apps like WeChat in China that bundle various services in one place are often called super-apps, and Shmulik argued that in the U.S., “it’s no longer a reach to claim that Snapchat may be closest to Super App status.” He said that the company is making progress on achieving both utility and entertainment value for users while ensuring that Snapchat is useful for users on their own as well as people looking to do things as a group.
He has an outperform rating on the stock and boosted his price target to $80 from $60.
Snap shares have gained 56% over the past three months as the S&P 500 SPX, +0.75% has increased 7%.
