Top Analyst Very Bullish on Large-Cap Internet Stocks as Digital Ad Growth Explodes


This is the top growth stock idea at Jefferies, and it reported strong results after the close Wednesday. Snap Inc. (NYSE: SNAP) is a social media company consisting of leading social media platform Snapchat and hardware device Spectacles. Through Snapchat, the company facilitates communication through visual media, enabled by the mobile camera.

Users are able to share photos, videos and text and are exposed to publisher content from top media companies such as The Wall Street Journal, Vogue, People, MTV and CNN. Advertisers use the platform to promote products, which has a strong reach with the coveted millennial demographic.

Nearly four years after its rocky initial public offering, Snap and its social-media app Snapchat have found their path and then some. Many across Wall Street felt that the earnings would be very strong for the company. Jefferies agreed and noted this before the report:

SNAP has under-performed since sharing its goal of growing rev 50% over the next several years, perhaps indicating they’ve set the bar too high. We are positive fundamentally and anticipate a significant first quarter revenue beat. We raise our revenue estimate to $771 million (implying 67% year-over-year growth), which is 4% ahead of the Street. Similar to its peers the drivers of the revenue beat are 1) checks pointing to higher than expected ad spend, 2) the iOS 14 privacy change delay, but also 3) healthy user activity with our 3P data showing 37% year-over-year growth in downloads. We expect conservative second quarter guidance, but with the company beating the revenue guideance10 of the last 11 quarters we would expect second quarter growth to accelerate versus the first quarter.

Jefferies hit the target, as Snap shares rose in after-hours trading on Thursday after the company reported first-quarter results that beating Wall Street’s expectations on earnings, revenue and user growth. Snap projects year-over-year revenue growth of 80% to 85% for the second quarter.

The Jefferies price target is $81, which is well above the $74.79 consensus figure. Snap stock closed on Thursday at $57.05, but shares traded up more than 6% in Friday’s premarket.

Digital ad media growth will continue, and the way to play it is with the industry leaders. Shares of these three top companies are excellent holdings for long-term aggressive growth investors looking to have exposure but who want to stay with tried-and-true leaders that offer better risk profiles.

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