Photo-sharing app operator Snap (NYSE:) was a turning point during the pandemic. The past year brought a record number of daily active users to the Snapchat social connection and entertainment app.
This momentum has made Snap one of the strongest social media stocks this year. Shares have gained more than 300% since March 2020, as investors began to believe in the company's plan to grow its advertising business.
Snap weekly chart.
What brought investors back to this once-doomed name was evidence that the company's app redesign is starting to pay off, allowing users to spend more time watching premium content on Snapchat.
California-based Snap has tactfully channeled this increased traffic to increase its appeal to advertisers by investing in augmented reality, new advertiser tools, and support for high-quality creators.
In this vein, Snap launched Spotlight in November, a tool to promote popular videos by paying up to $1 million per day to creators of the top performing posts. As a result, the number of Spotlight users rose to 125 million by the end of the first quarter.
These steps increased revenue 66% to $770 million in the period ended March 31, and active users increased 22% to 280 million. During the latest earnings call, Snap Chief Executive Officer Evan Spiegel said more people were making new friends, using the app's mapping tool and posting stories, which are ephemeral videos and photos as the economy slows down in the early months. of the year began to open.
A buying opportunity?
Even after last year's strong rally, some analysts still believe there is more upside potential in Snap stocks and the recent weakness in his record high a purchase is opportunity.
In a recent note, Barclays raised its price target for Snap from $66 from $75 to $75, saying that user trends appear to be accelerating alongside the reopening of the economy, and that the company is "still in a good position." to generate reasonably significant revenue growth rates.”
Analysts at Morgan Stanley, which has a $75 price target for the stock, believe the Street is underestimating core momentum and future runway for revenue generation.
According to consensus estimates published on Investing.com, the majority of analysts have a buy recommendation for the stock, with the 12-month consensus price target about 28% higher than current levels. Snap closed at $60.50 on Thursday, down 3.15% on the day.
These bullish projections show that analysts believe in the company's strategy of driving growth by deploying and expanding augmented reality tools in international markets.
The social media company predicts it could generate revenue growth of 50% or more over several years as advertisers increasingly use Snap's augmented reality tools, which allow users to virtually try out products. On the global front, the company is adding more local content, investing in regional marketing campaigns and offering more language support to products.
Starting point
Snap has revolutionized the pandemic by deploying new tools and focusing on the right market segment. This momentum is likely to continue in the post-pandemic economic environment, making this social media name a good candidate to buy and hold.
