Snap's AI-Driven Revamp Sparks Analyst Optimism: JMP Securities Predicts 70% Rally

JMP Securities upgrades Snap amid app revamp, says shares can rally 70%

The tide may finally begin to turn for shares of Snap , according to JMP Securities. Analyst Andrew Boone upgraded the Snapchat parent company to market outperform from market perform, citing the app's planned redesign. The overhaul, which includes artificial intelligence tools , was unveiled last month. "With Snap set to roll out Simple Snapchat and launch Sponsored Snaps, we see an inflection in impression growth as we believe the company can grow U.S. and North American engagement and drive greater ad load with its new ad products," he wrote. SNAP YTD mountain Shares in 2024 Snap shares have struggled this year, plummeting 41%. But the declines may be nearing its end. The stock rose more than 2% before the bell. The analyst also assigned a $17 price target on shares, implying 70% upside from Tuesday's close. Boone thinks that price target is warranted given the "product catalysts" posed by the revamp and better advertising performance as the company improves its product offering. "While we acknowledge we certainly could be a quarter early given the uncertainty around the timing of the rollout of these products and early reaction from users, we generally like product-led growth initiatives and find valuation compelling at 15.5x 2026E EBITDA," Boone said.

JMP turns bullish on Snap, highlights Sponsored Snaps and U.S. engagement growth By Investing.com

On Wednesday, Snap Inc (NYSE:SNAP) stock received an upgrade from Market Perform to Market Outperform by JMP Securities, along with a new price target of $17.00. The firm's optimism towards the social media company stems from upcoming product launches and advertising enhancements expected to increase user engagement and advertising capacity in the U.S. and North America. JMP Securities anticipates that the rollout of Simple Snapchat and Sponsored Snaps will mark a turning point for Snap, as these initiatives could significantly grow the platform's impression rates. The analyst highlighted that the company's efforts to enhance its direct response advertising products are showing signs of success, based on feedback from major performance advertisers. Despite potential uncertainties regarding the timing of new product rollouts and initial user reactions, JMP Securities is encouraged by Snap's product-driven growth strategy. The firm finds the valuation attractive, noting that the stock is trading at approximately 15.5 times its estimated 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA). The $17.00 price target is founded on a 25.0 times multiple of the projected 2026 EBITDA, which represents a premium compared to Snap's peers. JMP Securities justifies this premium by pointing to the potential growth catalysts from Snap's upcoming redesign and increased advertising load. In other recent news, Snap Inc. continues to attract attention from various analysts. TD Cowen has maintained its Hold rating on Snap, projecting a slowdown in revenue growth for the third quarter but a slight increase in earnings before interest, taxes, depreciation, and amortization (EBITDA) at $96 million. The firm also highlighted a marginal improvement in user engagement and strong growth in ad impressions. BMO Capital, on the other hand, maintained its Outperform rating on Snap, indicating positive trends such as a significant increase in user engagement due to the company's collaboration with Google (NASDAQ:GOOGL) Cloud to enhance artificial intelligence features. BofA Securities has maintained a neutral stance following modest growth in Snap's third-quarter user reach metrics. Snap reported a 16% year-over-year increase in total revenue, reaching $1.24 billion in Q2 2024, with advertising revenue accounting for $1.13 billion. The company also engaged in merger activity, with its partner Sahara AI securing $43 million in a funding round led by Pantera Capital. In addition to these developments, Snap and Meta (NASDAQ:META) have committed to working with U.S. and British authorities to enhance online safety for children. This comes in response to the formation of a trans-Atlantic government working group aimed at protecting young users on platforms like Snapchat and Instagram. These are the recent developments in Snap Inc., showcasing a steady, albeit slow, expansion of the company's user base and potential revenue from advertising. To complement JMP Securities' optimistic outlook on Snap Inc (NYSE:SNAP), let's examine some key financial metrics and insights from InvestingPro. Despite the recent upgrade, InvestingPro data shows that Snap's stock price has fallen significantly over the last three months, with a 30.36% decline. This drop could present an opportunity for investors who agree with JMP's bullish stance. InvestingPro Tips highlight that Snap operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could provide financial flexibility as the company rolls out new products and advertising enhancements. However, it's worth noting that Snap is not currently profitable, with a negative P/E ratio of -15.26 over the last twelve months as of Q2 2024. On a positive note, analysts predict that the company will be profitable this year, aligning with JMP Securities' expectations for growth. The revenue growth of 11.08% over the last twelve months and a more robust 15.84% growth in Q2 2024 support the narrative of potential improvement in Snap's financial performance. For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 11 more InvestingPro Tips available for Snap, which could provide further context for investment decisions in light of the recent analyst upgrade.