As of Monday morning, SnapChat shares were up more than four percent at $12.25 per share. Last week the company’s shares gained over seven percent after announcing they plan to pursue new revenue sources.
RBC upgraded the company’s rating from sector perform to outperform and raised its target price from $10 to $17 per share.
3 reasons to bet on SnapChat in 2019
It’s too soon to tell if SnapChat shares will make a significant comeback but early indicators look good. Here are three things to watch from SnapChat in 2019:
They’re adding new sources of revenue
Last week, SnapChat hosted its first Partner Summit where they announced new revenue initiatives they’re launching. Notably, they’re launching a new gaming feature called Snap Games. Users can access the games on the app through the chat feature and can invite their friends to play with them.
Gaming is a multi-billion dollar industry so this announcement earned quite a bit of buzz for the company. But they’re also adding new content and new augmented reality features.
The company’s fundamentals are improving
SnapChat is redesigning their Android app and it should be finished by the end of 2019. A poor experience on the app was a big cause of the company’s lull in user growth in 2018. Android currently dominates most of the international markets.
In spite of its lagging user growth, the company has held steady at 186 million active users. And their revenue rose 36 percent in their first-quarter results.
Their expenses are slowing
One of the biggest criticisms of SnapChat is how high their expenses are. In 2018, their free cash flow was negative $234 million. A good portion of this came from their cloud infrastructure expenses, which rose by 28 percent.
SnapChat is not breaking even yet but analysts have noted that their expenses do seem to be slowing in 2019. Their posted losses per share were four cents which are lower than expected.
SnapChat shares are on an upswing in 2019 but some analysts are hesitant, pointing to the company’s rocky previous year. SnapChat’s new target of $17 per share was the price tag the company went public with over two years ago. Their shares have lingered below the $17 mark for the majority of the time SnapChat has been a publicly traded company.
Still, there are reasons to be hopeful about the future of SnapChat shares. If the company can lower its expenses and improve the overall user experience, they could be a good pick for 2019.