As Snap’s (SNAP) stock continues to grow, is it time to buy?
Since its debut on the stock market a few years ago, many investors have been worried that the company would never mature. The company has yet to turn a profit, while internal turmoil and a mishandled app redesign pushed investors away from the company— Facebook’s release of its own Snapchat-like feature on Instagram didn’t make things much better. But with its stock up 140% since the beginning of the year, some think the Snap has turned the corner. Aegis analyst Victor Anthony thinks so, as he upgrades his rating from Hold to Buy, with a $17 price target.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Victor Anthony has a yearly average return of 15.7% and a 65% success rate. Anthony is ranked #81 out of 5,202 analysts.
With Anthony upgrading his rating on Snap to Buy, this will be the analyst’s first time he is bullish on Snap since before the IPO. Though the analyst says he was “skeptical of Snap’s ability to drive user growth, concerned that the ad platform was inferior to competitors in terms of targeting and analytics, and concerned that there was no clear path towards profitability and positive cash flow inflection,” he believes “Snap can stand on its own.”
With many comparing Snap to Facebook and Twitter, Anthony acknowledges that the two are in “better fundamental shape today compared to Snap, given that both are profitable and generate free cash flow.” However, the analyst sees promise as “Snap is emerging from its challenges with improving monetization, better user trends, and lower cash burn.”
Of course, Anthony sees some risk in Snap, including increased competition from Instagram and others online platforms. Another risk is regulation, though Anthony doesn’t see this as impact Snap as it would Facebook and others.
Among Wall Street, many see Instagram as Snap’s biggest threat. Though Facebook had tried (and failed) to acquire Snapchat six years ago, the company instead used Instagram to compete with Snapchat. While features are similar, Instagram has a much larger user-base across the world, as Snap continues to rely on users largely from the US and Europe.
All in all, while Anthony is more optimistic on Snap, most of Wall Street needs some more time. The company overcame the most important challenge — developing a widely popular app — but many are still waiting to see if business can act like a business and show profitability. TipRanks analysis of 26 analysts shows a consensus Hold rating on the stock, with only five recommending Buy, 18 saying Hold and three suggesting Sell. The 12-month average price target is $12.45, which implies an 8% decrease from current levels. (See SNAP’s price targets and analyst ratings on TipRanks)