Snap Rockets to All-Time High After Major Shakeout

Snap Inc. (SNAP) is trading near an all-time high in Wednesday’s pre-market after shaking off Tuesday’s 11% decline and lifting more than 24% off the midday low.  Wild price action tracked similar market behavior after the social messaging app sold off in reaction to better-than-expected Q4 earnings on Feb. 5. The enthusiastic dip buying highlights exceptionally strong interest that could eventually lift the stock well into triple digits.

Snap Analyst Day

The company’s first analyst day as a public entity was well received by Wall Street, with members of that community calling the event a ‘resounding success”.  Focus on the ‘five pillars” — Camera, Map, Communication, Stories and Spotlight – gained the respect of participants. Head of Product Development Peter Sellis then surprised the group, boasting “revenue growth north of 50% for multiple years”, well above current expectations.

Pivotal Research Group raised their Snap target to $95 after the event, noting “CFO Derek Anderson wrapped the event with a frame work around: a) TAM for SNAP relative to smart phone penetration — still relatively nascent b) reiterated the 50% multi-year growth goal and c) provided a frame work around revenue opportunities for the five pillars. In spite of the gross margin commentary, we would expect a material increase to 2022-2024 revenues and EBITDA. We are increasing our PT to $95 from $81.50 based on 17x 2023 EV/Revs.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 26 ‘Buy’, 1 ‘Overweight’, and 8 ‘Hold’ recommendations. However, four analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $15 to a Street-high $92 while the stock will open Wednesday’s U.S. session about $3 below the median $75 target. Sustained upside is possible with this placement, fueled by momentum traders.

The stock broke out above the 2017 high at 29.44 in October 2020 and took off in a powerful uptrend that entered a rising channel, confirming strong institutional sponsorship. It topped out in the mid-50s in December and eased into a rectangle that worked off overbought technical readings through time instead of price, ahead of a February breakout that’s stair-stepping to new highs. This marks a nearly picture-perfect upstand that’s likely to continue for months to come.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.