Snap Inc (SNAP) Excellent Long-Term Investment Opportunity

Snap Inc (NYSE: SNAP) stock is trading in the green today after the company reported better-than-expected fourth quarter results. The social media company’s revenue in the quarter increased by 36% to $389.8 million, better than the Street’s forecast of $377.5 million. GAAP loss for Snap narrowed to $191.7 million. Daily active users (DAUs) in the quarter came in at 186 million, better than the estimates of 185 million. This number allayed analysts’ fears regarding growth at Snapchat. The company experienced growth in the number of users mainly due to the performance improvements in the Android version of its mobile app. Investors also cheered the fact that Snapchat’s average revenue per user totaled $2.09 in the quarter, a massive 37% increase year over year. Snap’s six-second video ads and product catalogs also showed signs of success. Snap’s gross margin came in at 45.4% in the fourth quarter, compared to 33.1% in the prior-year quarter.

Snapchat’s management said that the company sees profitability “within reach.”

Snap, however, remains a loss-making company. And perhaps that’s why analysts are divided about the stock.

The biggest bullish call for Snap Inc (NYSE: SNAP) stock came from Raymond James, whose analysts upgraded the stock to “Market Perform.” The firm’s analyst Aaron Kessler cited a stability in active-user growth as one of the reasons of his bullish call. The analyst also likes growth in the advertisement division for Snap.

After the fourth-quarter results, Credit Suisse increased its price target for Snap to $10.50.

RBC also upped its price target to $10. The firm’s analyst, however, believes that Snap stock will take a lot of time to show growth. RBC’s analyst Mark Mahaney said in a note that Snap stock looks similar to Twitter when the blue bird was struggling back in 2017. Mahaney thinks that Snap will grow amid an improvement in the Snapchat Android app, ads platform auction transition and product innovation.

Goldman Sachs analyst Heath Terry increased his price target for Snap Inc (NYSE: SNAP) to $8 from $6, citing Snapchat’s longer-term potential. Terry also likes Snapchat Pixel, a platform launched by Snap in 2017 to help advertisers track their sales.

Morgan Stanley remains on the sidelines when it comes to Snap stock. The firm’s analyst Brian Nowak said in his report that while Snap managed to show a healthy user growth in the fourth quarter, the company is still burning a lot of cash. He said that the case for “no longer being bearish” on Snap stock cannot be made yet.

We believe that Snap is an interesting buying opportunity for a long-term investment. The company is working on cost cutting, product innovation and ads growth. These efforts will slowly but surely bear fruits in the future.

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Author does not have investment in stock discussed in this article.

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