Snap Inc. shares are rising in after-hours trading on Friday after RBC Capital Markets turned bullish on the stock and suggested that the company is near an inflection.
Analyst Mark Mahaney upgraded the stock to outperform from sector perform on Friday afternoon and upped his price target to $17 from $10. With the new target, Mahaney is the most upbeat analyst on Snap’s stock
of the analysts tracked by FactSet.
The stock is up 1% in after-hours trading, building on a gain of nearly 5% from Friday’s regular trading session. Mahaney’s upgrade comes a day after Snap held a partner event and unveiled new features around gaming and third-party integrations. He is encouraged by those announcements as well as general signs of stabilization at the company.
Mahaney cited third-party app data that showed “consistency” in Snap’s traction on iOS devices and “positive” signs on the Android front. Snap has long struggled with issues around the performance of its Android apps, but Mahaney argued that trends across both operating systems suggest that Snap could return to growth in its daily-active-user (DAU) count. The company posted flat growth in the December quarter and saw DAUs decline in the two periods prior.
Snap could be reaching “a potential inflection point,” according to Mahaney, as growth in DAUs could prompt revenue to reaccelerate. Gross-margin expansion and a reduction in operating losses could also help the company turn things around.
Mahaney is upbeat about the company’s new efforts in multiplayer gaming, including both with third-party titles and its own originals. “We believe this is a strong and natural progression for Snap and that solid execution here should lead to rising engagement and improved monetization,” he wrote.
Snap’s recent announcements are a subject of debate on Wall Street, and MarketWatch previously highlighted concerns from a Morgan Stanley analyst about Snap’s ability to monetize its new games.
Shares have more than doubled so far this year and closed Friday at $11.84. The S&P 500
is up 15% year to date.