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Analysts at Morgan Stanley upgraded their rating on Snap Inc. (NYSE:SNAP) to "equal-weight" from "underweight," citing improving prospects for its ad business and a more balanced risk-reward scenario for the stock.
"Our latest advertiser/agency conversations speak to improvements in SNAP’s ad business, including 7.0 attribution tools, and an increase in advertiser willingness (particularly from SMBs) to test DR offerings more broadly. We also believe there is an improved app install offering coming for further growth," Morgan Stanley analysts wrote in a July 23 report.
The equity ratings firm said it was encouraged by "recent ad checks" at the company, which showed some signs of advertisers returning to spend on the platform. "If more advertisers are able to find incremental value that can drive monetization from here and help diversify spend across verticals, it could support faster revenue growth," they added.
Snap (SNAP) has a price target of $16, hiked from $12, implying a 10% upside to the stock. Morgan Stanley claims valuation vs. peers is "more reasonable" and sees a balanced opportunity as the company continues to carry out on its core initiatives.
Snap (SNAP) is down nearly 12% so far this year as of Monday's close, while the S&P 500 Communication Services Index was up 24.2% for the same period.