Not Being Bullish on Facebook Inc (FB) a Big Mistake, Snap Inc (SNAP) Gets One of its First Buys


It’s an interesting day for the tech investor, as Facebook Inc (NASDAQ:FB) receives a vote of confidence from an analyst who regrets ever straying from the FB parade, and as Snap Inc (NYSE:SNAP) gets one of its first bullish notes from a five-star ranked analyst on Wall Street. While BTIG sizes up Facebook’s strong performance and stellar trends, believing it was an error to not upgrade the stock back to a buy even sooner, Drexel Hamilton initiates coverage on Snap with a strikingly positive take, attributing the millennial card as a powerhouse player in the company’s pocket. Let’s dive in:

Analyst Admits It’s Time to Get Back on the FB Bandwagon

BTIG analyst Richard Greenfield believes he has “stayed on the sidelines too long” on Facebook’s prospects and recognizes renewed opportunity to get bullish on the social media titan once again.

“Not having a BUY on Facebook has clearly been a mistake in 2017 and we are simply not going to allow that mistake to continue,” asserts the analyst, who upgrades from Neutral to a Buy rating on shares of FB with a $175 price target, which represents a just under 27% increase from where the stock is currently trading.

Greenfield explains, “We downgraded FB shares based on our concern that investor expectations had gotten too far ahead of themselves, particularly with Facebook’s video strategy and associated monetization taking longer to materialize than we had expected.”

Though Mark Zuckerberg’s brainchild outclassed earnings expectations in back-to-back second and third quarters in 2016, shares nonetheless “stagnated on fears of a meaningful deceleration in growth […]” Yet, “after crushing Q4 2016 investor expectations” coupled with trends far more robust than anticipated this year, the stock has surged 15% year-to-date with no signs of momentum stopping.

“The secular trends toward mobile devices globally and the accelerating shift of ad dollars are simply too strong to ignore, particularly with the unexpected strength of Instagram Stories and visible signs that Facebook video strategy is evolving from its early missteps centered on live video,” Greenfield concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Richard Greenfield is ranked #1,056 out of 4,549 analysts. Greenfield has a 55% success rate and collects 8.8% in his annual returns. However, when recommending FB, Greenfield confronts a loss of 0.6% in average profits on the stock.

TipRanks analytics demonstrate FB as a Strong Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 34 are bullish on Facebook stock and 2 remain sidelined. With a return potential of nearly 17%, the stock’s consensus target price stands at $162.00.

Snap’s Long-Term Ace: King of Millenials

Snap has been garnering lots of caution alerts following its IPO, but Drexel Hamilton analyst Brian White highlights millennial favorability as an asset not to be underestimated. Seeing the popular Snapchat app parent company as one to be reckoned with despite a less competitive user base, the analyst initiates coverage on SNAP with a Buy rating and a price target of $30, which implies a just under 45% upside from where the stock is currently trading.

White opines, “Snap is a very unique tech company that should not be pigeonholed in a particular industry, or investors risk missing the forest for the trees. Snap views itself as ‘a camera company’ and we believe this fosters a mindset for innovation to transcend the boundaries of its competitors. We view Snap as a platform for the imagination that unlocks the creativity of its users and allows uninhibited expression with friends. Snap is a fun place to spend time which can be monetized.”

Considering “[…] Snapchat […] has risen in the ranks to become one of the most popular mobile applications with […] the most desirable, largest and most difficult to reach generation for advertisers – millennials,” the analyst sees cause to hitch a ride on the Snap train, and particularly praises Snap as an “early pioneer” in the vastly emerging sphere of augmented reality. For White, this could be a crucial key to Snap’s ability to capture monetization prospects in mobile advertising.

Ultimately, “Although other social messaging platforms enjoy a much higher user base, we believe Snapchat has a cachet with millennials that will be difficult for other platforms to garner. Moreover, we believe there is significant opportunity for the Snapchat ‘pixy dust’ to spread overseas and across generations in the coming years,” White contends.

According to TipRanks, five-star analyst Brian White is ranked #143 out of 4,549 analysts. White has a 64% success rate and realizes 9.8% in his yearly returns. When recommending SNAP, White earns 0.0% in average profits on the stock.

TipRanks analytics indicate SNAP as a Sell. Based on 13 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on Snap stock, 5 maintain a Buy, while 6 issue a Sell. The 12-month average price target stands at $19.50, marking a 4% downside from where the shares last closed.

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