Is it time for the stock to soar after three analyst upgrades?

With TikTok, However, some experts on Wall Street clearly see potential for Snap stock to rise further over the next 12 months.

Of course, with the stock price already doubling since the end of September, it’s easy to ask for additional upside. Still, as investors prepare their holiday shopping lists and look for the best deals for next year, it may be worth considering what analysts say about Snap.

Upgrades are more important than target price

With SNAP stock rising from $8 in September to around $17 recently, analysts have virtually no choice but to raise their price targets. As a result, it’s not surprising that Jefferies analyst James Heaney raised his price target on Snap stock from $12 to $16.

More importantly, Heaney upgraded SNAP stock from Hold to Buy. Jefferies analysts noted the strength of Snapchat’s direct response (DR) advertising. These ads encourage app users to take immediate action (e.g. buy a product).

“With recent improvements to our DR platform (70-75% of return), we will see better advertiser performance and faster budget growth,” Heaney explained.

Plus, Snap could get a revenue boost from DR ads and other advertising due to X’s troubles with its controversial owner, Elon Musk. If advertisers leave X, some may switch to Snapchat.

In any case, overall sentiment toward Snap appears to be improving since October, when Snap declined to provide formal revenue guidance due to the “unpredictable nature of the war.” The company “observed a pause in spending” on its “advertising campaigns immediately following the outbreak of war in the Middle East” at the time. As a result, Snap’s management recognized that “there remains a risk that this pause could continue or grow in scale.”

War is truly unpredictable. Nonetheless, as the end of the year approaches, advertisers appear likely to continue using Snapchat despite the unrest in the Middle East.

Going back to Heaney, SNAP stock has already surpassed its $16 price target, so this isn’t necessarily the stock investors should be looking for in 2024. As for Heaney’s upgrade, it makes sense, but for contrarian investors, all the positive commentary has already been priced into the stock price.

Benefits of a ‘healthy’ advertising environment

Also among the bulls is Wells Fargo (NYSE:WFC) analyst Ken Gawrelski, who upgraded SNAP stock from Equal Weight to Overweight and raised his price target from $8 to $22. That’s a huge jump from the price target, but analysts should keep up with the stock’s current price.

Clearly, Gawrelski isn’t overly concerned about the war suppressing advertising revenues in future quarters.

“The key to a sustained positive inflection point in Snap stock is the continuation of a healthy digital advertising environment and steady growth in the U.S./Canada, enabling growth in the teens beyond the first quarter of 2024,” Wells Fargo analysts said.

Gawrelski is also optimistic about Snap’s “reinvestment in our ad technology stack, new ad management, and renewed focus.” Unfortunately, it will be several months before Snap gets another opportunity to show advertising-driven revenue growth in its next quarterly earnings report.

In a similar move to Gawrelski, Guggenheim analyst Michael Morris raised his rating on SNAP stock from Neutral to Buy and raised his price target on the stock from $9 to $23. According to Barron’s, Morris predicted that “demand for digital advertising is poised to grow and the current consensus fails to recognize its potential.”

AI tools can boost Snap’s revenue

Morris’ comments reflect Gawrelski’s vision for a “healthy digital advertising landscape.” Perhaps Snap could benefit from this experience with a premium Snapchat+ subscription tier that includes artificial intelligence-assisted features. Amazingly, Snapchat+ generated $20 million in net revenue for the first time in November.

Not long ago, Snap announced that Snapchat+ had reached 7 million subscribers. Snap is targeting 10 million Snapchat+ users “in the medium term.” So while this may be difficult to quantify, it appears that adding AI tools to the mix will help Snapchat+ generate strong revenue for Snap.

Now that Snapchat+ has added several new AI-based features, Snap isn’t afraid of escalating the AI ​​arms race on social media. New features include the ability to create and transmit AI-generated images.

Everything seems to be pointing to an auspicious 2024 for Snapchat and its shareholders. The biggest concern, as I see it, is that SNAP stock traders have already priced in the company’s future growth. Still, adding a few Snap stocks to your portfolio isn’t the worst idea in the world. This is especially true if you’re looking to diversify your holdings with social media stocks.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.