Snap (SNAP 1.60%) has had a rough go of it as a publicly traded company. After seeing user growth slow in the face of competition from Facebook (META 0.49%), the company botched an app redesign. It's also ignored Android users, and by extension most international markets, with a subpar Android app experience. As a result, revenue growth hasn't lived up to expectations.

But BTIG analyst Rich Greenfield thinks the worst might be over. He formerly had the lowest price target for Snap on Wall Street, $5, but he's now its biggest bull with a price target of $15. Here's what turned him around and a look at whether Foolish investors should follow.

Snapchat logo.

Image source: Snap.

Performance advertising is turning around

It's been nearly two years since Snap gave marketers a self-service ad platform, and the company finally started to see some positives in the fourth quarter after over a year of tanking ad prices. Ad prices climbed 3% sequentially from the third quarter.

Greenfield sees strength coming from Asian companies looking to reach American consumers. "We are increasingly confident that overseas direct response/performance advertisers are taking advantage of low relative bid prices on ad inventory in the U.S.," he wrote.

Indeed, Snap Ads are priced relatively low compared to ads on Facebook or Instagram. But it's not clear they actually provide a significantly better return on ad spend for marketers. An increase in active advertisers will help Snap show more relevant ads to users because it has more ads from which to choose the most relevant ad. But Snap still has work to do to make its ads more valuable; otherwise, marketers won't be able to produce good returns for very long as ad prices reach equilibrium with returns.

Check out the latest earnings call transcript for Snap.

Better content in Discover

Greenfield also noted that the quality of content in Snapchat's Discover section has improved from the "racy, clickbait-y content" he described on Snap's third-quarter earnings call. Snap is investing a lot of money in shows and premium content for the platform.

Snap Originals have the potential to drive users to the Discover section of the app and attract higher-caliber advertisers. Facebook is taking a similar approach with Watch, its video platform, investing hundreds of millions of dollars in content in the hopes of driving greater video ad revenue. Neither has proven to be a meaningful source of revenue, but it's still early going.

Higher-quality content may be more attractive to advertisers, but Snap still needs to draw users to that content.

Sticky user base and network effect

Despite Snap's missteps over the past year with its app redesign and buggy Android app, users have mostly stuck around. Snap's user base fell by just 1 million people in 2018, and users were flat sequentially in the fourth quarter.

"Snapchat is 'how' this generation of users communicates making it difficult to leave even if users are frustrated," Greenfield wrote.

Snap's network effect may be keeping users in place, but the company is still unable to compete with Facebook. Facebook has seen the number of daily active users on Instagram Stories skyrocket well past Snapchat's to reach 500 million. That's up from 300 million in November 2017. For reference, Snapchat has 186 million daily active users.

Facebook's established user base will continue to hinder user growth for Snapchat, especially as the messaging platform looks to grow outside the United States where Facebook is even more dominant.

A positive outlook for the rebuilt Android app

Finally, Greenfield noted that the rebuilt Android app is helping attract new users to Snapchat as well as the Discover section. Snap CEO Evan Spiegel mentioned during the company's fourth-quarter earnings call that the struggle to grow the user base is more on the Android side than on iOS.

Spiegel pointed out there are roughly 2 billion Android users around the world who don't use Snapchat, so even a small penetration rate will have a meaningful impact. Greenfield said he sees the new Android app working to attract new users.

But consider all the users who have tried Snapchat on Android in the past and abandoned the app because it was slow and buggy. The company has a lot of work to do to regain their business, so penetration rates may remain relatively low.

Overall, Greenfield presents several positive trends for Snap. That said, there's reason to be skeptical that those trends will improve Snap's financials enough to justify tripling his price target.

That concern ought to be elevated for long-term investors as Snap's 2019 results will come from grabbing low-hanging fruit, including bringing in new advertisers at low average ad prices, attracting a few more Android users with a rebuilt app, and improving content. Those aren't sustained growth drivers.