Snapchat parent Snap's (NYSE:SNAP) turnaround continues to take hold, and shares jumped yesterday following a pair of upgrades from Wall Street. Analysts at both Jefferies and Cowen boosted their respective ratings on the stock, citing continued improvement in the core advertising business and stable user growth. Snap could even potentially become profitable on an adjusted basis in 2020.

Here's what investors need to know.

Group calling on Snapchat.

Image source: Snap.

International user growth is strong

Jefferies analyst Brent Thill upgraded his rating from hold to buy while increasing his price target from $17 to $21. The analyst believes that Snapchat will be able to maintain user growth in international markets, where Android is more popular.

The company had rolled out a revamped version of its Android app last year, addressing long-standing complaints around the app's performance. User growth immediately rebounded, driven largely by Snap's "rest of world" segment that includes emerging markets. Nearly 60% of daily active users (DAUs) added over the past year have been in that geographical segment.

Snap is also investing in local-language content to increase its appeal abroad, which is helping attract users, in Thill's view. Jefferies is confident that the tech company will be able to report breakeven adjusted EBITDA in the fourth quarter (Snap's guidance calls for adjusted EBITDA of breakeven to $20 million), which could pave the way for adjusted profitability in fiscal 2020. Jefferies estimates that ad revenue could potentially double over the next three years.

For context, trailing-12-month (TTM) revenue is currently $1.5 billion, which jumped more than 40% over the past year. The company's monetization outside of North America remains fairly low, so Snap's next task will be improving monetization of all the new international users it is attracting.

"We believe Snap stock has more room to run in 2020," the analyst wrote in a research note to investors.

Advertisers are warming up to Snapchat

Cowen analyst John Blackledge similarly boosted his rating from market perform (equivalent to hold) to outperform (equivalent to buy) while ratcheting up his price target from $16 to $20. After conducting a survey of prominent ad buyers, Cowen is becoming more bullish on ad spending on the platform.

The survey showed rising adoption of direct-response ads among ad buyers, while more advertisers are exploring marketing campaigns targeting younger demographics (users in the 13-to-34 age range), among whom Snapchat is famously popular. Approximately 6% of respondents in the survey viewed Snapchat as an "emerging platform for meaningful ad spend" going forward, while ad prices continue to stabilize.

Snap has been launching new products over the past year that have resonated with users, according to Cowen, which in turn attracts advertisers. Blackledge boosted his estimates over the next five years and expects 2020 revenue to jump 36% to $2.3 billion while the company reports $163 million in EBITDA.

Snap is set to report fourth-quarter earnings results on Feb. 4.

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