On Tuesday, an analyst from BofA maintained a Buy rating and a price target of $22 on Snap (NYSE:SNAP) shares. The analyst told investors that the success of Snapchat Plus in gaining momentum may contribute $12 million to the company’s revenue in the third quarter and $200 million in 2023.
Snapchat Plus, the company’s paid subscription service that was introduced at the end of June of this year, now has more than one million worldwide paying subscribers, and the company has announced that it has unveiled new Plus subscriber features.
“Plus has one million premium customers, which represents a penetration of less than 0.3% of Snap (NYSE:SNAP) worldwide daily active users (347 million in 2Q’22) and less than 1% of US DAUs (99mn). Snap’s Plus service costs $3.99 per month, with discounts available for subscriptions of either 6 or 12 months, “the analyst said.
“We are heartened to see the early acceptance of Plus by consumers, and we anticipate a revenue potential of $12 million for the third quarter, assuming that there would be 1 million typical users during that period. We anticipate that there will be an opportunity for around 5 million subscribers in 2023, based on a penetration rate of 3% among US DAUs, 1% among European users, and 0.4% among users in RoW. Plus has the potential to earn about $200 million in yearly revenue, which is an upside of 4% relative to our current expectations of $5.4 billion for 2023.”
Snap and Tiktok
The analyst also brought up the increasing scrutiny directed toward the social media company’s competitor TikTok. This comes after it was reported by BuzzFeed (NASDAQ:BZFD) that employees of TikTok based in China accessed private information on US users, and after the FCC Commissioner raised security concerns over TikTok and appealed to Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL) to remove the app from their app stores.
Turning our attention back to the social media company, the analyst elaborated that in their opinion, the company’s “valuation at below 4x 2023 sales (comparable to the Pandemic value bottom in 2020) includes chances that 2023 revenue would fail, with minimal confidence on upside potential.”
Snap’s shares are currently worth $12.64 and have gained more than 3% today. The company saw a gain of 13% in its Q2 revenue. The current market cap of the company is approximately $20.86 billion.
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Author Shariq Khan 
