Snap Wins An Upgrade Following Lock-Up Expiration, Q2 Results

Analysts at Cantor Fitzgerald turned bullish on Snap Inc (NYSE: SNAP) to reflect a "significant shift" in the stock's risk to reward profile after the lockup expiration and the company's second-quarter earnings report. The firm's Kip Paulson upgraded Snap's stock rating from Neutral to Overweight with an unchanged $15 price target.

Snap's lock-up expiration started more than two weeks ago and any negative impact on the hundreds of millions of shares that can now be openly sold should be behind the company, Paulson argued. Also, Snap's co-founders Evan Spiegel and Bobby Murphy confirmed they won't be selling any of their approximate 190 million shares this year.

Meanwhile, Snap's second-quarter earnings report did contain a few encouraging metrics, Paulson continued. Specifically, the company's lower ad pricing was a result of low bid density in the self-serve channel. While some view this as a negative the other side of the story is that low pricing implies higher return on ad spend, which should attract advertisers to the platform.

On the negative front daily active users on the Snapchat platform slowed down in the second quarter to a 21 percent year-over-year growth (or 7 million sequential daily active users) mostly due to competition from rival Instagram. However, Snapchat's users are "highly engaged" and spend more time on the platform versus Instagram and are visiting the platform more frequently.

Bottom line, Snap should benefit moving forward from a growing engagement, DAU growth estimates (5 million to 10 million per quarter) are more achievable which could result in "significant upside" to Snap's average revenue per user in 2018 and beyond.

At last check, shares of Snap were up 3.61 percent at $13.05.

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