CREDIT SUISSE: Advertisers are finally warming up to Snapchat (SNAP)

pulse

October 11, 2017 3:56 PM

Shares of Snapchat's parent company are down over 40% since its IPO in March, but the company is slowly enticing advertisers to try out the platform.

Advertisers that are used to producing ads in traditional, horizontal formats might finally be warming up to Snapchat's unique vertical orientation.

The app's parent company, Snap Inc., in July launched a new self-service 'Snap Publisher' tool for advertisers to cut vertical ads in less than two minutes, which should entice more advertisers to try out the platform, according to Credit Suisse.

"As most of the large brand advertisers are already sitting on horizontally-formatted creatives, taking the friction down in porting the ad content into a vertical format vs. creating a new ad should bolster the incentive to test the platform," analyst Stephen Ju said in a note Wednesday morning.

The Swiss bank has raised its price target for Snap ahead of earnings to $20 from $17 — a price the stock hasn't traded at since June, and well above Wall Street's consensus of $15, according to Bloomberg data.

"While we concede that it has taken longer than anticipated," Ju said. "We submit that Snap is taking the necessary steps in the background to reduce friction against incremental ad budget allocations."

Credit Suisse estimates that the cost per one thousand clicks fell as low as $2.35 during the second quarter of 2017, but have begun to rebound.

"As the company takes additional steps to evangelize the platform and attract more advertisers, we are hoping to see greater auction pressure build throughout 3Q and 4Q," said Ju.

Shares of Snap are up 2.79% in trading Wednesday morning, but are still down more than 40% from its $29.44 peak, hit just after shares began trading in March. The company is expected to report earnings on November 15.

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