Snap Inc., (NYSE: SNAP), has disappointed its investors throughout the year 2024.
Stocks have dropped by over 40% during the last three months. This has brought their valuation down to a more attractive level.
Is this an excellent buying opportunity, or is it just another price trap?
Andrew Boone is an analyst with JMP Securities.
If you invest $1,000 today in Snap, your investment could grow to $1700 by 2025.
Boone recently shared with clients this positive outlook.
Why does JMP believe Snap is a good investment?
Boone has upgraded Snap from “underperform” to “outperform”, and set the price target at $17. This implies a 70% potential upside over its current levels.
The recent changes in the business have made him optimistic.
Snap has announced a revamp that will include new AI tools.
JMP Securities believes that these tools will significantly increase Snap’s stock price in the future.
Boone noted a “shift in Snap’s trajectory of growth,” noting an “inflection” in the growth rate for impressions.
He plans to introduce Simple Snapchat, Sponsored Snapchats and other features that will enhance North American advertising and user engagement.
Boone believes that these new advertising products have a strong potential to increase revenue.
Snap currently does not pay dividends.
Analysts believe that Snap’s redesign of its app, which reduces the navigation to just three screens, makes Spotlight more accessible, and will likely increase usage.
The change should improve user engagement in general, particularly among Snapchat users older than 18, which account for 80%.
JMP Securities believes that Sponsored Snaps, which are sponsored images on Instagram and Facebook, will be a major factor in the growth of ad revenues in 2025.
Snapchat is currently opened around 40 times per day by users, and the majority of interactions take place within Snapchat’s messaging.
Sponsored Snaps allows advertisers to send messages straight into the inboxes of users, potentially earning an extra $180 million.
Based on JMP’s estimate of advertising revenues of $4.9billion in 2024, this would be approximately four percentage point growth.
Snap shares trade at a discounted price
Boone is confident that Snap will release these products soon, even though it’s not clear when.
The company has a product-led approach to growth, and he finds its valuation attractive. He cites a 15x estimated EBITDA for 2026.
JMP has a positive outlook for Snap, just one week before Snap is scheduled to announce its financial results for the third quarter.
Analysts anticipate Snap will report a profit of 13 cents a share. This would represent a significant improvement from the 21-cents loss reported in the same period last year.
Snap’s daily active users have also grown, with a 9 percent increase year over year to 432 millions in its latest quarter.
Increased user numbers generally leads to increased advertising, which in turn drives revenue growth.
Snap’s stock is currently trading near the 52-week low. This valuation makes it attractive for investors to buy at this level.
The post If you invested $1,000 today in Snap stocks, this is your return for 2025 may change as new information becomes available.
