By Emily Bary
Shares of Snap Inc. jumped on Thursday afternoon after Pivotal Research said that the company had “turned the corner” on a key metric.
Pivotal analyst Michael Levine thinks Snap /zigman2/quotes/205087158/lastsale SNAP +0.54% is making strides on user growth following its launch of a redesigned Android app earlier this year, which was meant to remedy engagement and performance issues. The user momentum is one reason why Levine upgraded Snap’s stock to buy from hold in a note to clients, joining a small group of analysts who are bullish on the stock in the face of a big recent rally.
“We don’t want to miss the inflection point in the business, despite already strong year-to-date performance,” he wrote. Snap shares have climbed more than 150% so far this year, including a more than 8% bump in afternoon trading Thursday.
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Levine likes Snap’s recent enhancements to its augmented reality offerings, which he suggested could be a driver of user growth. “We think the latest launch of lenses is among some of the most impressive product innovation we have seen in some time from the company,” Levine wrote. This aspect of Snap’s business is “less appreciated based on our industry checks,” he wrote.
Snap has witnessed much change within its leadership team since the company went public in March 2017, but recent additions could be having a positive impact. “We continue to hear glowing things about the organization under Jeremi Gorman,” Levine wrote of Snap’s new chief business officer, who began last fall after years on Amazon.com Inc.’s advertising team.
“That we are already seeing better focus on ad agency relationships and a category-focused sales team — exceptionally low-hanging fruit — suggests alignment is moving in the right direction,” Levine said regarding his recent channel checks on the marketing side. He raised his price target on the stock to $17.25 from $13.25.
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Of the 40 analysts tracked by FactSet who cover Snap, just five have buy ratings, while 30 have hold ratings and five have sell ratings. The average target price on the shares is $11.77, 16% below current levels.
The 155% rise in Snap shares so far this year places the stock among some of tech’s best performers in 2019. Joining Snap are Roku Inc. /zigman2/quotes/205087179/lastsale ROKU +0.13% , up 226%, Shopify Inc. /zigman2/quotes/209033712/lastsale SHOP -9.97% , up 114%, and The Trade Desk Inc. /zigman2/quotes/207508089/lastsale TTD -4.36% , up 104%. The S&P 500 /zigman2/quotes/210599714/realtime SPX +2.28% has risen 13% so far in 2019.