Why Goldman Sachs Gets More Funny on Snap Stock

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The stock jumped more than 5% on Tuesday after Goldman Sachs raised its target price, saying the Snapchat parent would likely beat its own lead in the fourth quarter.

Shares of Snap (ticker: SNAP) rose 5.8% to $ 51.05 in the afternoon trading.

In his positive remark, Heath Terry, an analyst at Goldman Sachs, sets a price target of $ 70 on the stock, compared to $ 47, which is an implied 45% of the lead on technical improvements and business partnerships that the company has had since its third quarter published results, fair.

Based on research from third-party app data, Terry’s team concluded that Snap’s direct response ads remained strong through the latest Covid-19 related closures and will contribute 8 percentage points above consensus estimates to the growth in the fourth term.

For the fourth quarter, analysts polled by FactSet expect sales of $ 844 million, down 51%.

The rest of Wall Street is certainly not as excited about Snap stocks as Terry. Analysts have an average target price of $ 42.12, which represents a downside of about 17% for the stock. Of the analysts who follow the company, 67% rate it a buy and 26% name it a hold. Only three analysts, or 8% of the 39 it covers, have a sales rating.

Terry predicted after the fourth quarter, Terry predicted that the demand from advertisers for online inventory would grow, which would also benefit other social media stocks as TV viewers declined and the economy recovered from the damage caused by coronavirus-related locks.

And as advertising demand increases, so do Snap’s advertising tools. Terry wrote that Snap’s efforts to give advertisers more information about the performance of its ads, including customizing a tool that helps customers optimize their advertising spend, can earn customers more value from every dollar spent on the platform . Snap should attract more advertising customers, or a larger share of the spending of existing advertising buyers, if it can show the benefit of using their tools.

Terry also has Snap’s partnership with

Unit software

(U), the maker of video game developer tools, which allows advertisers to place ads in games.

Unity has a large inventory and boasts more than two billion monthly active end users, Terry noted. Because of the partnership, advertisers using Snap’s tools can now target the large number of users, significantly increasing the size and availability of advertising inventory that Snap can sell. The agreement also includes that developers using Unity’s platform will have access to a piece of Snap technology that makes logging in to games and apps easier.

Snap stock experienced a strong year and rose by about 200% as the benchmark

S&P 500

index rose by 16%. The

Nasdaq Compound

index rose by 45% in 2020.

Write to Max A. Cherney by [email protected]