Snap Shares Seen Poised For Second Half Rebound

Deutsche Bank analyst Lloyd Walmsley told investors in a research note this morning that he believes Snap's (SNAP) shares should rebound as second half of the year inflection comes into focus and as continued product innovation drives Daily Active User, or DAU, and engagement growth over time.

REBOUND AHEAD: Deutsche Bank's Walmsley told investors in a research note that he has always modeled Snap as a "big" second half of the year story, and his upbeat ad checks suggest a big revenue ramp remains on track. The analyst also pointed out that he disagrees with the narrative that the company is not innovating. Walmsley noted that he sees innovation thriving at Snap across the app, ad product, and ad tech, and continued product innovation should drive DAU and engagement growth over time. Further, the analyst said his intra quarter ad checks have started to pick up with industry contacts noting brand advertisers measuring ROIs are increasingly of the view that Snap offers compelling view rates, view-to-completion rates, and ROIs. Snap is moving quickly to improve ad tech product to address more budget, he contended, adding that while work needs to be done, investors are "overly negative" on the progress at Snap relative to his industry conversations. Walmsley argued that Snap shares offer a "compelling" risk/reward profile at current levels, and would take advantage of lockup supply to add to long-term positions. The analyst reiterated a Buy rating and a $20 price target on the shares.

WHAT'S NOTABLE: Snap was in the spotlight last week after three sources told Business Insider that they had "heard the chatter" that Google (GOOG; GOOGL) made an offer to acquire the social media company in early 2016. According to the publication, the Alphabet unit is rumored to have bid "at least" $30B, which is about double the company's market cap now that it is public, to buy Snap.

PRICE ACTION: In morning trading, shares of Snapchat's parent have gained over 3% to $13.97. After pricing its IPO at $17 per share on March 2, Snap finished its first day of trading with an advance of about 44%, closing at $24.51 per share.