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July 12, 2019, 10:15 a.m. EDT

Snap’s ‘viral’ filters earn the stock more love from Wall Street

Ahead of second-quarter report, Goldman upgrades Snap due to user-growth momentum

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By Emily Bary


Daniel Acker/Bloomberg

Snap Inc. appears to have regained some of its former glory, and now Wall Street analysts don’t want to miss the boat.

Goldman Sachs’ Heath Terry became the latest to upgrade Snap shares /zigman2/quotes/205087158/composite SNAP +0.42%  on Friday, writing that the company’s new lineup of hyper-realistic augmented-reality filters has generated renewed user interest and could lead the messaging company to positively surprise in the coming quarters.

Snap has been struggling in recent years to cope with the surging popularity of Facebook Inc.’s /zigman2/quotes/205064656/composite FB +0.03%  Instagram, which copied some of Snapchat’s most fundamental features, including filters and ephemeral “stories” posts—with more success. Funny filters that allowed users to portray themselves with mustaches or dog ears helped put Snap on the map in its early days, and now the company seems to have recaptured that magic with its latest iteration of filters, which let users swap genders or portray themselves as babies.

Don’t miss: Snap shorts are down $1 billion in paper losses this year

Terry expects a re-acceleration in user growth for Snap, as product improvements drive more smartphone users to the service. Snap’s new filters have picked up a lot of buzz, but the company has also relaunched its Android app and come out with new games that can be played within the company’s messaging function. Snap’s insufficient Android app hurt the its ability to attract overseas users last year, but the company may be turning a corner.

Snap is showing momentum on the ad front as well, according to Terry, who upped his rating on the stock to buy from neutral, while raising his price target to $18 from $13. “Our checks with advertisers also lead us to believe that the company’s continued innovation in its ad-stack, particularly in self-serve, should allow Snap to substantially improve monetization of user time spent on the platform over time,” he wrote.

Read: Stitch Fix stock surges after Goldman Sachs upgrade

Terry joins a growing chorus of analysts who are upbeat about Snap’s potential. Pivotal Research cited user-growth strides in a June upgrade, while BTIG, Bank of America, and MoffettNathanson have also cheered the company’s recent traction.

Snap shares have gained 184% so far this year, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.03%  has risen 34%. The company is due to report second-quarter results on July 23.

/zigman2/quotes/205087158/composite
US : U.S.: NYSE
$ 16.90
+0.07 +0.42%
Volume: 33.30M
Sept. 18, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$23.21 billion
Rev. per Employee
$409,309
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/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 188.14
+0.06 +0.03%
Volume: 9.95M
Sept. 18, 2019 4:00p
P/E Ratio
31.88
Dividend Yield
N/A
Market Cap
$536.58 billion
Rev. per Employee
$1.57M
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,006.73
+1.03 +0.03%
Volume: 1.71B
Sept. 18, 2019 5:35p
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Emily Bary is a MarketWatch reporter based in New York.

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