Richard Drew/AP
The banks that led Snap‘s initial public offering are also among the company’s biggest cheerleaders.
The colead bookrunners Goldman Sachs and Morgan Stanley maintained their buy ratings on Snap and left their price targets unchanged, even after the company reported disappointing earnings that saw user growth slow to its lowest pace in years.
Here are the key elements of Morgan Stanley’s bull case, as laid out in a client note:
- Snap’s daily average user (DAU) growth may have slowed year-over-year, but it’s seeing a better pace of expansion specifically for Android devices, which lead global smartphone market share. “A stronger Android offering could lead to faster long-term DAU growth,” the firm wrote.
- The company’s engagement was strong in the first quarter, while time spent per user also rose to more than 30 minutes a day.
- Snap’s first-quarter ad load was still less than one ad per DAU, per hour, which badly lags Facebook and Instagram. The firm sees this as an opportunity for growth.
- Price…