Snap Inc (SNAP) Presents Low Risk-Reward Opportunity, Tesla Inc (TSLA) Offers 48% Upside


Snap Inc (NYSE:SNAP) is making waves today after officially going public, with shares skyrocketing post-IPO. Though one Aegis analyst underscores caution centered on eight key points, he nonetheless points to greater hints of optimism, thanks to Snap’s potential to capture ad share gains in the coming years. Meanwhile, Tesla Inc (NASDAQ:TSLA) seems ready to up its innovation game, revealing in its 10K plans for new cars and smart spending, particularly with hopes to boost revenue on the horizon. Between Tesla’s upcoming moves as well as an end market in China that continues to flourish, Baird analyst sees every reason to be bullish on the stock. Let’s dive in:

Snap’s Positive Ad Share Gains Balanced Against Risks

Snap shares have raced 53% since the stock went public, and though investors are in a buying frenzy, Aegis analyst Victor Anthony is chiming in officially from the sidelines. However, the analyst predicts solid ad share gains throughout the next two years and is cautiously optimistic on the popular Snapchat maker’s prospects.

Following the IPO, the analyst formally establishes a Hold rating on SNAP with a $22 price target for year-end 2017, which implies a 15% downside from where the shares last closed.

“Our concerns about Snap’s business and stock are eight-fold: 1) slow user growth and no growth in some regions – same issue with Sell-rated Twitter; 2) the ease by which Buy-rated Facebook has been replicating parts of Snapchat’s product across its ecosystem – perhaps our most focused concern; 3) Snap’s lack of an ecosystem; 4) the ad mix is heavily weighted towards brand versus direct response; 5) ad targeting capabilities are inferior to Facebook’s and Google’s, and marketers cite analytics as a weakness relative to Facebook; 6) a large percentage of advertisers view Snap as experimental spend – similar to Twitter at the time of its IPO; 7) lack of a clearly defined path towards profitability, and 8) corporate governance – investors have zero control. That said, we conducted extensive checks within the ad industry and find that marketers are enthusiastic about the prospects of creating ads to get in front of Snap’s coveted demographic,” Anthony surmises, ultimately surveying Snap as a “sustained ad share gainer” through 2019.

According to TipRanks, five-star analyst Victor Anthony is ranked #174 out of 4,512 analysts. Anthony has a 63% success rate and gains 12.1% in his annual returns. When recommending SNAP, Anthony earns 0.0% in average profits on the stock.

TipRanks analytics indicate SNAP as a Sell. Additionally, Brian Wieser of Pivotal Research rates a Sell on SNAP with a $10 price target, which represents a 61% increase from where the stock is currently trading, and James Cordwell of Atlantic Equities rates a Hold with a $14 price target, which represents a 46% decrease from where the stock is currently trading.

Tesla’s Innovation and Strategic Spending 

Baird analyst Ben Kallo is notably confident on Tesla on the heels of the electric car giant releasing a 10K with previews of exciting updates on the rise. As such, the analyst reiterates an Outperform rating on shares of TSLA with a $368 price target, which represents a 47% increase from where the stock is currently trading.

First, the analyst underscores that between the debut of a new line for a “broader cross-section of the consumer vehicle market” coupled with goals to bring commercial electric vehicles to the table, the giant is thriving on its innovation game. In the past, CEO Elon Musk’s company made it clear of an intent to expand the consumer division with both a considerably large truck as well as a “high passenger-density urban transport” automobile.

Second, though Tesla has plans to bump up expenses, Kallo sees this as a wise investment to further both sales revenue as well as charging infrastructure. Currently, the giant’s store locations total 265, which marks a 27% rise from 2015, where the company had 2018 locations. Likewise, supercharger stations have jumped 35% from 584 in 2015 to 790 today. Even when glimpsing into the giant’s destination charging program, where Tesla partners with both hotels as well as shopping centers to give further charging possibilities, the program has shot up 130% to 4,140 global locations compared to just 1,800 in 2015.

While “bears have argued TSLA does not have charging infrastructure to support mass Model 3 production,” Kallo continues, “TSLA indicated it is increasing the size of the supercharger network at an accelerated rate.”

Lastly, with expansion prospects in the China market and considering that China came in second for the bulk of the giant’s revenue in 2016 with 15%, only beat by the U.S. at 60%, the analyst sees plenty of room for growth and opportunity for TSLA moving forward.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Ben Kallo is ranked #1,406 out of 4,512 analysts. Kallo has a 48% success rate and realizes 3.7% in his yearly returns. When suggesting TSLA, Kallo yields 26.5% in average profits on the stock.

TipRanks analytics demonstrate TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 6 are bullish on Tesla stock, 5 remain sidelined, and 6 are bearish on the stock. With a 3% potential downside, the stock’s consensus target stands at $242.80.

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