Last week, JPMorgan analyst Doug Anmuth said he prefers Twitter over Snap into the companies' analyst days
Morgan Stanley analyst Brian Nowak upgraded Snap (SNAP) to Overweight on Monday morning, saying his new bottom-up U.S. model speaks to a longer engagement and monetization runway. Expanding use cases drive more engagement, and engagement leads to more monetization, the analyst contended, adding that he expects more color on the company's monetization plans for Snap, Discover, Spotlight and Maps to be shared at Snap's first investor day coming up on February 23.
BUY SNAP: Morgan Stanley analyst Brian Nowak upgraded Snap to Overweight from Equal Weight with a price target of $80, up from $50. While the analyst acknowledged that Snap's share price has been up "substantially" over the past year as the company has "meaningfully improved" its ad product, go to market, and monetization engine, his new bottom-up U.S. model for core Snap, Discover, Spotlight and Maps leads Nowak to see continued engagement, revenue and EBITDA growth that is faster than expected. The analyst expects more color on the company's monetization plans for all of these products to be shared at the company's first investor day coming up on February 23. He also noted that his new $80 target only incorporates higher monetization from these products in the U.S, but his $105 bull case target also incorporates higher global monetization.
Expanding use cases drive more engagement, and engagement leads to more monetization, the analyst contended. As seen with other platforms such as Facebook (FB) and Google (GOOGL), new forms of engagement create opportunities for more monetization, and Nowak thinks the same will hold at Snap. He is particularly optimistic about Discover and Spotlight as they are benefiting from and driving accelerating trends in online video consumption and ad budget shifts.
JPMORGAN PREFERS TWITTER OVER SNAP: In a research note to investors last week, JPMorgan analyst Doug Anmuth maintained Overweight ratings on both Snap and Twitter (TWTR) ahead of each hosting analyst days this week. The analyst expects accelerating revenue growth from each in 2021 given what were called out as favorable comparisons and company-specific initiatives related to user growth, performance-based advertising, and an increased focus on optimization tools. Nonetheless, Anmuth told investors that he prefers Twitter over Snap and that it is one of his top picks for 2021.
During its analyst day, Anmuth expects Snap to emphasize how the company and platform have evolved in recent years, along with the strength of the management team. The analyst is also focused on Snap’s 5 core platforms and their business potential, with particular emphasis on Map and Spotlight. Additionally, Anmuth expects to hear more about Snap’s plan to close the considerable ARPU gap versus peers, but does not expect specific long-term targets.
For Twitter, the analyst believes the analyst day is somewhat more important, with more to prove across both product and monetization. He expects Twitter to outline long-term goals or targets, which could be 20% mDAU growth, 20%-25% revenue growth, and 20%-plus operating margins.
PRICE ACTION: In late Monday morning trading, shares of Snap have gained about 0.5% to $65.82.
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