Social-media platform Snapchat’s parent company Snap witnessed a sharply higher stock price on positive news: an analyst’s buy rating from expected higher ad revenue.
“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.,” writes Richard Greenfield, media analyst at BTIG Research in a note.
Greenfield believes some of this increased activity started in the third quarter of 2018, ramping up in the fourth quarter. He adds: “We sense U.S. advertisers are still transitioning from seeing Snapchat as a brand platform to a DR-performance platform.”
But there is a long-term risk, he says. Performance advertising, which direct-response advertising has long relied on, is not always viewed as the “highest quality.”
Still, he says for the long term, Snapchat needs to get brand advertisers on board, convincing them that return on media investment performance works well on the platform.
Snap’s fourth-quarter 2018 revenue climbed 36% to $390 million; it was 43% higher to $1.2 billion for the full 2018 year.
Snap stock closed up 12% to $11.28 in Thursday trading.