Snap's stock is having its best month in 3 years, and Jefferies sees more upside

Snap Inc. shares have climbed nearly 30% so far in November as they race toward their best month in more than three years, and a Jefferies analyst now thinks the recent run can keep going.

James Heaney of Jefferies raised his rating on Snap’s stock SNAP, +6.43% to buy from hold Thursday, writing that the Snapchat parent company could see revenue-growth upside moving into next year.

Snap has made progress with its direct-response advertising platform, and that “should continue driving better advertiser performance and faster budget growth going forward,” according to Heaney. He’s already seen some evidence that the recent changes are paying off, as Snap’s 11% sequential growth in the latest quarter was its best third-quarter year-over-year growth since 2020.

“[T]he rebuild of the [direct-response] ad platform had a temporarily negative impact on large advertisers that is already reversing,” Heaney wrote, a trend that could help the company drive revenue growth at a mid-teens rate in 2024.

“We believe the decision to enable on-platform checkout with [Amazon] is a sign that [Snap] is deepening its integrations with large advertisers to encourage more ad spend,” he continued, as he boosted his price target on Snap’s stock to $16 from $12.

Heaney also likes the company’s positioning for the balance of this year, noting that the company’s internal fourth-quarter outlook “was highly conservative given caution around the impact of the conflict in the Middle East.”

Snap shares were up nearly 3% in Thursday’s premarket action. They had gained 29.7% so far in November, through Wednesday’s close, putting them on track for their fourth-best monthly gain on record and their best monthly performance since they surged 50.9% in October 2020.

He upgraded shares of Pinterest Inc. PINS, +1.58% as well, moving to a buy rating from his prior hold stance as he and his team “now have more conviction in the possibility of 20%+ [revenue] growth” in 2024.

The Jefferies team expects “ad pricing to flip from a major headwind to a tailwind in [fiscal 2024] implying that impression growth would need to decelerate materially for [Pinterest] to miss next year’s expected mid-to-high teens [revenue] growth,” Heaney wrote, while lifting his price target to $41 from $32.

Shares of Pinterest were advancing roughly 2% in premarket activity.