- Most have warned of Snap’s monetization issues, but Goldman Sachs couldn’t disagree more.
- Snap’s switch to programmatic ads will generate revenue growth, according to Goldman Sachs.
- The investment bank raised its price target for Snap shares to $23, up from $18.
Up and down Wall Street, banks have been warning about Snap’s monetization problems. But a report from Goldman Sachs analyst Heath Terry begs to differ.
Goldman, which raised its Snap price target to $23 from $18 following the company’s blockbuster fourth quarter, is confident based on Snap’s increased “visibility into pricing.” Snap’s recent move into creating programmatic ad technology put a dent in its ad pricing, but Goldman notes the shift, which has “weighed on monetization growth in recent quarters, will naturally slow.”
Although CPM (cost per impression) was down 25% quarter-over-quarter, total ad revenue increased by 38% for that time period because the number of ad impressions grew four-fold over the past year.
Although the Goldman’s report warns of Snap’s volatility in what it calls “near venture stage investment,” the bank maintains the company’s “audience and engagement represent a unique asset that will benefit from the growth and diversification of internet usage and advertiser adoption.”
Snap priced its IPO on March 1 at $17, and the stock reached a high of $29.44 just two days later. Thestock then dropped sharply, bottoming at $11.24 in August.
But shares began to rebounded as Tencent took a 10% stake following the company's dismal third-quarter results and after the company announced a redesign to its app.
Snap shares are up more than 30% this year and trade above $19 apiece.
