Social Media

Snap's March Madness stories show how it intends to keep millennials hooked, says RBC's Mahaney

Snap up nearly 4% on bullish street coverage
Snap up nearly 4% on bullish street coverage

Snap's NCAA men's basketball 'March Madness' content is "the most compelling content you will find online today," RBC Capital Markets analyst Mark Mahaney told "Squawk Alley."

It's that sort of content that will help Snap keep millennials hooked, attract older users, help the company stay ahead of competitors like Facebook and attract more ad dollars, he said.

"If they succeed, if they continue to innovate for both consumers and advertisers, we think they can easily sustain triple digit growth for several years," he said.

Mahaney initiated coverage of Snap Monday with a buy rating. With a $31 price target, he is the most bullish Snap analyst on Wall Street.

He's not worried about Snap's high price to sales multiple, because the company is growing five times faster than Facebook, albeit off a much smaller base.

By way of comparison, over the past year Alphabet's Google generated around $80 billion in ad revenue, Facebook's ad revenues were $26 billion and Snap generated $600 million in ad revenue.

RBC conducts semi-annual surveys of advertisers and users and found that fifty percent of millennials and 20 percent of 36 to 50 year olds in the U.S. are currently using Snapchat.

"We think that's a bullish indicator. If the company continues to innovate — they have out innovated everybody so far — they have to keep doing it," said Mahaney.

Snap shares soared Monday, hovering around the $24 level the stock began trading at earlier this month, after a number of Wall Street analysts initiated coverage of the stock. Snap is up 14.1 percent over the past week, according to FactSet.

Matthew Kobach, manager of digital and social media at the New York Stock Exchange (NYSE), center, takes a selfie photograph wearing a pair of Snapchat Spectacles by Snap Inc. on the floor of the New York Stock Exchange (NYSE) during the company's initial public offering (IPO) in New York.
Michael Nagle | Bloomberg | Getty Images