Once left for dead by many investors, Snap (NYSE:SNAP) stock is now on a major roll. A number of analysts have become upbeat on Snap stock, and although the departure of the company’s CFO, announced in the middle of last month, briefly hurt the stock price, it has subsequently bounced all the way back.
Meanwhile, SNAP stock has many upcoming positive catalysts, including further international expansion, the reported improvement of its Android app and likely increases in its ad revenue and user metrics.
All or most of these positive catalysts should be revealed in Snap’s fourth-quarter results, which are slated to be announced on Feb. 5 after the market closes.
Reason to Buy SNAP Stock: It’s on a Roll
Since reaching a trough at the end of December below $5, SNAP stock has rebounded around 40%, despite the resignation of the company’s CFO, Tim Stone, which was announced on Jan 15. Stone resigned after only eight months on the job.
Although part of the reason for the tremendous rebound of Snapchat stock was the rejuvenation of the stock market, investors have clearly become much less bearish about the company’s outlook. As a result, the Street should be more open to viewing the company’s results positively than it has been in the past.
Reason to Buy SNAP Stock: International Expansion
As Market Realist noted recently, Snap is getting much more revenue from foreign markets than it has in the past. Additionally, the website pointed out that Snap has not yet followed in the footsteps of Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Twitter (NASDAQ:TWTR) by creating an app that’s optimized for developing countries. Meanwhile, Snap only hired its first head of its India operations four months ago, suggesting that it only recently began putting a great deal of effort into growing its user base in the huge, rapidly growing nation.
Given the fast growth of Snap’s international revenue in recent quarters and its hiring of a head of its India operations for the first time only four months ago, it’s reasonable to assume that Snap’s overseas sales expanded quickly again in Q4 and will continue to do so going forward.
Reason to Buy SNAP Stock: Improvements in Vital Metrics
In Q3, Snap’s revenue surged 43% year-over-year, and its average revenue per user jumped 37% year-over-year.
And in recent weeks, a few research firms have written that Snap’s ad trends have further improved. On Jan. 10, Cowen upgraded SNAP stock two notches, raising it to “outperform” from “underperform.” According to Cowen’s survey of ad buyers, the company’s ad revenue trends have improved.
Upgrading SNAP stock on Jan. 14 was Citi, which raised its rating on the shares to “neutral” from “sell.” According to CNBC, the firm reported that advertisers and agencies “are generally optimistic about the outlook for the platform, including stating that policy changes have made it easier to distribute content.”
Also boding well for Snap is survey data from August 2018 that was published by eMarketer. In the survey, 56% of Generation Z respondents and 40% of Millenials said they had increased their use of the platform. The data suggests that, as I have predicted in the past, teens are continuing to use Snap as they age. The survey also indicates that fears about Facebook’s Instagram dooming Snap are overblown and Snap’s usage continues to increase overall.
And in October, eMarketer released a forecast which also indicates that Snapchat’s usage is increasing. Specifically, the firm found that the number of Americans using the platform in 2018 had risen 7.1% year-over-year.
“Monthly users are still growing even though Snapchat reported a decline in daily users in Q2,” eMarketer senior forecast analyst Chris Bendtsen was quoted as saying.
Reason to Buy SNAP Stock: Improving Android Ratings
Snap’s ratings on Android have turned positive, suggesting that it has finally improved its troubled Android app, Cascend Securities reported on Feb. 1, according to Bloomberg.
Since eMarketer and Snap itself have blamed Snap’s (slightly) deteriorating daily usage trends largely on problems with its Android app, the improvement of the app could result in stronger daily usage trends. Additionally, since Android is particularly strong in many international markets, the improvement of the app could improve Snap’s overseas performance.
As of this writing, the author did not own shares in any of the companies named.
