Snap (NYSE:SNAP) received some positive commentary from Wall Street, as Benchmark initiated coverage with a buy rating, as the firm believes the stock is not accurately showing future advertising gains.
Analyst Mark Zgutowicz, who has a $50 price target on Snap, implying roughly 20% upside, noted that Snap has improved its return on ad spend relatively to peers and aside from Tik Tok, which is owned by China's ByteDance (BDNCE), Snap is "best positioned to capture incremental digital advertising market share in coming years."
"Additionally, we expect a compounding effect from Snap’s differentiated and expanding utility as both an entertainment and communication-based platform in [rest of world], driving DAU’s to ~500M+ by 2025, or 14% above consensus," Zgutowicz wrote in a note to clients.
Snap shares ticked lower in premarket trading to $39.70, down slightly more than 0.5%.
In addition, Zgutowicz added Snap's 91 million daily active users in the U.S. are "unjustifiably
discounted relative to social media comps, especially when considering future US digital advertising budget share gain." The analyst expects that to change in the coming years as Snap's "use case for utility becomes more universally adopted."
The company also has additional levers to pull, including strengthening its targets solutions, as well as roughly 107 million daily active users for its Spotlight product, compared to 650 million for Tik Tok, and the upcoming augmented reality push.
Last month, Goldman Sachs ranked Snap as one of the stocks retail investors sold at high levels, coming in 9th out of 10 names.