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The logo of the Snapchat mobile app.
Lionel Bonaventure / AFP via Getty Images
Snap
Shares are up more than 5% on Tuesday, after Goldman Sachs hiked its target price, saying Snapchat’s parent company would likely beat its own fourth-quarter expectation.
Shares of Snap (ticker: SNAP) were up 5.8% in afternoon trading to $ 51.05.
In his positive comment, Goldman Sachs analyst Heath Terry set a $ 70 price target on the stock, up $ 47, justifying an implied 45% increase in the technology improvements and business partnerships the company has announced since the results of the third quarter.
Based on research from third-party app data, Terry’s team concluded that Snap’s direct-response ads have remained strong through the latest Covid-19-related lockdowns and will contribute 8 percentage points above consensus estimates to growth in the fourth quarter.
For the fourth quarter, analysts polled by FactSet expect revenue of $ 844 million, representing 51% growth.
The rest of Wall Street is definitely not as enthusiastic about Snap stock as Terry. Analysts have an average target price of $ 42.12, which represents a downward trend of about 17% for the stock. Of the analysts following the company, 67% rate it as a Buy and 26% rate the name as a Hold. Only three analysts, or 8% of the 39 who report it, have a Sell rating.
Looking past the fourth quarter, Terry predicted that advertiser demand for online inventory would continue to grow, benefiting other social media stocks as viewership declines and the economy recovers from the damage done by the coronavirus .
And as the demand for ads grows, Snap’s advertising tools keep getting better. Terry wrote that Snap’s efforts to give advertisers more information about how their ads are performing, including customizing a tool that helps customers optimize their ad spend, will help customers get more value from every dollar spent on the platform . Snap should collect more ad clients, or a higher share of the spend from existing ad buyers, if it can continue to demonstrate the benefit of using its tools.
Terry also highlighted Snap’s partnership with
Unity software
(U), the creator of video game developer tools that allow advertisers to place ads in games.
Unity has a large inventory and has more than two billion monthly active end users, Terry noted. Thanks to the partnership, advertisers using Snap’s tools can now target that huge group of users, significantly increasing the size and availability of ad inventory that Snap can sell. The deal also means that developers using Unity’s platform will have access to a piece of Snap technology that makes logging into games and apps easier.
Snap shares have had a strong year, up around 200% as the benchmark
S&P 500
index rose 16%. The
Nasdaq Composite
index rose by 45% in 2020.
Write to Max A. Cherney at [email protected]