Snap Inc (NYSE:SNAP) could be on the road to racking up “significant” upside potential for its monetization per minute, says Cantor analyst Kip Paulson, who has become even more bullish on the popular Snapchat app parent company.
While likewise taking up ad revenue per daily active user (ARPU) forecasts, the analyst reiterates an Overweight rating on SNAP stock and bumps up the price target from $15 to $17, which implies a just under 15% increase from where the stock is currently trading. (To watch Paulson’s track record, click here)
For this year, Paulson anticipates domestic ARPU to experience 53.4% year-over-year growth up to $9.56 and for domestic ad revenue per minute (x 1,000) to climb 53.4% year-over-year to $0.87. Notably, these numbers are far below rival social media giant Facebook, who boasts $10.331 in domestic ARPU along with $5.66 in U.S. ad revenue per minute (x 1,000).
However, “On both counts, we believe Snap’s monetization has room to go substantially higher as bid density improves on the self-serve platform and as mobile video/ads in the Discover tab ramp up,” wagers Paulson, who thereby takes up his U.S. ARPU expectations for next year and the years to come, lifting his 2022 U.S. ARPU forecast from $61.79 up to $68.57, and his 2022 ad revenue per minute (x 1,000) projection from $5.64 to $6.26. The analyst acknowledges that even these raised estimates are “still substantially below FB’s $168.91/$9.26, respectively.”
Ultimately, “[…] aided by differentiated Snap shows landing on the platform and the secular rise of mobile video,” Paulson continues to be bullish on this social media player’s future gains, surmising: “Although DAUs are likely to remain in the high single digits to possibly low teens net-add range NT, we believe that ~30 minutes per day of user engagement (40+ minutes for the hard-to-reach 25 and under demo) and monetization potential from Snap shows are underappreciated by the Street. We remain constructive on the name given Snap’s rich/engaging canvas for brand advertisers and content owners; a young, lucrative, and hard-to-reach demographic; more-achievable DAU estimates two quarters post IPO; substantial upside potential for ARPU in 2018 and after; and attractive valuation relative to growth.”
The majority of Wall Street stands on less bullish ground than the analyst, as TipRanks analytics exhibit SNAP as a Hold. Based on 27 analysts polled by TipRanks in the last 3 months, 8 are bullish on Snap stock, 14 remain sidelined, and 5 are bearish on the stock. With a return potential of nearly 3%, the stock’s consensus target price stands at $15.11.