Shares of Snapchat parent Snap (NYSE:SNAP) have popped today, up by 5% as of 11 a.m. EDT, after the company got an upgrade from Wall Street. Pivotal Research boosted its rating on Snap from hold to buy.
Most analysts have been bearish recently, downgrading shares and reducing price targets, so having an analyst upgrade shares is helping investor sentiment. Pivotal Research analyst Brian Wieser thinks Snap has time to put together a turnaround, arguing that it's "not too late for management to find ways to reverse recent usage trends and generally improve monetization regardless of those usage trends." While Snapchat's controversial redesign has hurt engagement, the analyst believes the company's culture of experimentation is ultimately a good thing.
Wieser is reducing his price target on Snap shares from $9 to $8, in part to accommodate the stock's recent decline to all-time lows.
Wieser also raises the possibility that Snap will go private if it can't pull off a turnaround as a public company, pointing to how much lower the valuation is now compared to when it went public at $17 per share.
The analyst says that the broader digital advertising market could be tepid though, as social media companies continue to grapple with challenges around safety, security, and harassment. Advertisers could adjust their budgets accordingly if the sector continues to stir up controversy and raise trust concerns among consumers.
In terms of peers, Pivotal upgraded Twitter from sell to hold, and reiterated a sell rating on Facebook shares while reducing its price target on the dominant social networking company from $140 to $131.