Snap jumps after formerly neutral analyst raises price target amid management changes (SNAP)

Evan Spiegel

Snap shares are up following a rating upgrade from a team of analysts at Wedbush, who are encouraged by the company's recent management changes.
The social media company announced Monday that strategy chief Imran Khan was leaving, and Wedbush said his departure was beneficial to the company.
Khan has "no meaningful strategy or operations experience" and the company's strategy "has never been well-articulated," the analysts said.
Watch Snap trade in real-time here.

Shares of Snap jumped more than 2% on Tuesday after Wedbush, a formerly neutral firm that had been hesitant to make recommendations, upgraded the company amid a recent executive departure.

The social media company said Monday that its Chief Strategy Officer Imran Khan will be leaving the company, but will continue to serve in his current role to help with the transition. Company insiders and outsiders were not sorry to see Khan go, as "he had no ad or media background" and was not a "good fit in that strategy role," Business Insider reported.

"The company has a significant opportunity to align its strategic priorities with those of its shareholders and to articulate those goals in a much more consistent and clear way," Wedbush analysts including Michael Pachter said in a note sent out to clients on Tuesday.

"In our view, the change in top management positions the company to significantly improve its execution, and its valuation suggests upside from current levels."

The Wedbush analysts agree that Khan's departure is beneficial to the company because he has "no meaningful strategy or operations experience."

"Strategy at Snap has been unclear, and has never been well-articulated," Pachter said. "There appeared to be no clear path to profitability, and stock based compensation soaked up a tremendous percentage of revenues."

He added that Khan's departure will make its current Chief Financial Officer Tim Stone "more visible and more vital." And, he was confident that "corporate governance will improve and have a measurable impact on the development of and articulation of the company’s strategy."

Stone, a 20-year veteran executive from Amazon, was appointed in May after the company's first CFO Andrew Vollero stepped down.

Wedbush lifted its price target from $11.50 to $12.25 — more than 20% above the stock's current price — and raised its rating on Snap to "outperform" from "neutral."

Snap shares have been under pressure since last month, when the company reported quarterly results that beat on the top and bottom lines but said its number of daily active users fell 2% compared to the first quarter to 188 million. Wall Street analysts were expecting that number to increase to 193 million.

Snap introduced two new styles of its Spectacles camera glasses last week Wednesday. But shares still dropped as the tech sector sold off while social-media execs testified before Congress.

Shares of Snap are down 34% this year.

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