Social media company Snap Inc SNAP is more "stable" today than it was a year ago, according to JMP Securities. and investors should be buyers of the stock, according to JMP.

The Analyst

Ronald Josey upgraded Snap from Market Perform to Market Outperform with a new $20 price target.

JMP: Snap Could Post $2.4B In 2020 Revenue

The case against buying Snap's stock was partly based on concerns that the stock is "among the most expensive" at 7.5 times 2021 EV/revenue, Josey said in the Friday upgrade note. (See his track record here.)

Snap's near-term outlook is much clearer than before, and a higher revenue estimate for 2020 and beyond justifies buying the stock, the analyst said.

Snap is not only expected to grow its user base but increase engagement from newer products and services, he said.

This will lead to better monetization as advertisers are more attracted to the platform, Josey said. 

Snap should be able to grow revenue by 37% year-over-year in 2020 to $2.4 billion and report EBITDA of $89 million, for a 3.8% margin, the analyst said. 

In 2021, JMP expects revenue to rise another 30.5% to $3.1 billion. 

The research firm's new $20 price target is based on 10 times 2021 EV/revenue, with an enterprise value of $32 billion.

The even higher multiple is justified based on Snap's momentum and the fact it can better reach the coveted 13-24-year-old demographic, according to JMP. 

Price Action

Snap shares were trading 1.83% higher at $14.72 at the time of publication.