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Snap Stock Keeps Bouncing Back

By Rick Munarriz – Updated Jun 1, 2017 at 4:16AM

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Snapchat's parent keeps climbing the wall of worry, moving higher in back-to-back weeks despite lingering concerns.

Bears keep kicking Snap, Inc. (SNAP 2.75%) stock, but it can't seem to stay down. Shares of Snapchat's parent company took a beating three weeks ago after posting disappointing first-quarter results, but it has bounced back with back-to-back weeks of gains. 

Snap stock took a 21% hit the day after falling short of Wall Street's heady growth expectations and posting a wider quarterly deficit than analysts were targeting. It has gone on to gain the lion's share of that back. Snap stock came close to trading below its IPO price of $17 in its post-earnings sell-off, but it's now back above $20. It's been three months since Snap went public, and the stock has never been a busted IPO despite the incessant volatility and persistent skepticism.

Snapchat user walking in front of a Snapchat billboard.

Image source: Snap, Inc.

Bend and Snap 

There's been no shortage of negative news that could have weighed on Snap shares during this two-week rally.

  • The stock was singled out as a short idea by Hedgeye earlier this week, according to Bloomberg. 
  • Last week, we learned that former executive Brian Ames, who had leadership roles in business operations, growth, and revenue product marketing, left Snap to become president of advertising at Candy Crush Saga giant King.
  • Agency executives were telling Digiday last week that Snapchat was offering incentives to brands and media buyers in order to goose its ad sales for the current quarter.
  • There was also a news story in The Information detailing the growing pains that Snap has struggled with lately. 
  • Carson Block from Muddy Waters was also on Bloomberg TV, going over three reasons to be bearish on Snap.  

Investors would normally be fretting over one, if not all five, of these developments, but Snap stock's ability to keep moving higher through this is a sign of its resilient nature. Shortly after its IPO, it was easy to argue that the stock would hold above $17 because more than two dozen underwriters helped take the dot-com speedster public. However, now that we're three months removed from the starting line, there isn't likely to be the same kind of concern. Snap is on its own, and for now, it seems to be holding up just fine. 

Monetization concerns are being turned around as opportunities, and copycat competition has only pushed Snapchat to innovate at a faster clip. Investors may have been burned by Snap's first quarterly report as a public company last month, but the market's reaction lately seems to suggest that it won't be a repeat performance.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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