Please ensure Javascript is enabled for purposes of website accessibility

Can Snap Stock Bounce Back From Last Week's 8% Drop?

By Rick Munarriz - Apr 9, 2017 at 10:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Snapchat's parent slips after a pair of ho-hum analyst initiations and a report that Apple is working on a video-sharing platform.

It was another rough week for shares of Snap, Inc. (SNAP -0.95%), slipping 7.7% after a pair of analysts initiated coverage with uninspiring ratings. Things also didn't get any easier on the competitive front with a report claiming that Apple (AAPL 0.00%) is hoping to launch a video sharing and editing app that could possibly vie for Snapchat's young media-slicing audience.

Let's start with Wall Street. More than two dozen analysts have initiated coverage of the rapidly growing dot-com darling since its IPO more than a month ago, and that pace was expected to slow to a trickle after its underwriters put out their reports two weeks ago. Two new initiations took place last week, and both went with the equivalent of neutral ratings. 

Jim Kelleher at Argus slapped Snap stock with a short-term "hold" rating. Like many skeptics, Kelleher thinks the stock is priced for perfection at current levels. He did open the door for a change of heart -- and a long-term "buy" rating -- if the stock continues to drop with its fundamentals remaining intact.

Rich Greenfield at BTIG Research followed, initiating coverage on Snap with a "neutral" rating. He's concerned that the stock appears fairly valued at its current $30.2 billion enterprise value, and it will take a lot of innovation to justify gains and spur headier growth in the future. 

A Snapchat bllboard, behind a woman looking at a smartphone.

Image source: Snap, Inc.

Apple jacked

Bloomberg reported that Apple is in the process of developing a video sharing and editing app. Apple has been putting out video software for ages, but this would be a new iOS platform, and one that integrates easily with iPads and iPhones. There will be a social bent to the new offering, as Apple strives for deeper social ties within its product lines, and that could throw a wrench into Snapchat's popularity if it takes off.

The silver lining for Snap bulls is that Apple has struggled in the past to gain relevance on the social front. Does anyone remember when Apple's Ping tried to create a social layer to iTunes? If Apple tries to use the new platform as a way to keep iOS users close, it would also seem to suggest that it may not come out for the wider Android audience.   

Snap has proved to be a volatile investment in its early days as a public company. It's had a move higher of lower of at least 7.7% in five of its first six weeks on the market. Last week's run is actually tame compared with the first four weeks of double-digit percentage gains before following that up with a 0.9% decline. The stock is still trading comfortably above its $17 IPO price, but another volatile week or two on the downside can change that. Snap is a stock that loves to move. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Snap Inc. Stock Quote
Snap Inc.
SNAP
$14.56 (-0.95%) $0.14
Apple Inc. Stock Quote
Apple Inc.
AAPL
$141.66 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.