Snap, Inc. (SNAP +9.03%) investors can't seem to catch a break. Just when it seems as if Snapchat's parent company was starting to bottom out -- moving higher last month for the first time as a public company and working on a second straight increase in September -- the shares resume their slip-sliding ways.
Snap stock moved 10.46% lower last week, declining in all five of its trading days. There was no overly bearish news outside of Snap restructuring its hardware division, and even that can be viewed as a positive given the lull in Spectacles' popularity. The more likely explanation for the stock erasing its month-to-date gains is that investors are trying not to push their luck after the stock's recent gains.
Image source: Snap, Inc.
Snap shoot
Snap stock began last week trading 30% higher since bottoming out in the pre-teens in early August. Some rare bullish analyst notes, encouraging metrics on its Snapchat Discover video platform, and a smooth lock-up expiration helped fuel August's advance. The stock was also moving higher earlier this month, buoyed by another big Wall Street nod.
Kip Paulson at Cantor Fitzgerald raised his price target on Snap stock from $15 to $17, sticking to his overweight rating on the shares. He had just boosted his price goal from $14 to $15 a month earlier. Paulson's bullishness was fortified after considering the upside potential of Snap's monetization per minute on its differentiated mobile video platform.
Last week's slide may not seem fair at first glance. Recode reported that third-party data from market analytics company Jumpshot shows Snapchat gaining more new U.S. users than rival Instagram through August, a big deal since most of the headlines in recent months have been about Instagram eating Snapchat's lunch. Instagram still retains the global crown -- claiming 61.5% of worldwide new users last month to Snapchat's 38.5% take -- but Snap investors should welcome at the victory when it comes to the more lucrative stateside registrations.
Bloomberg did report that Snap reassigned its hardware lab chief to a different post at Snap and that about a dozen jobs were eliminated. Retreats are never pretty, but physical products have never been a strength at Snap beyond the initial buzz created by its clip-recording Spectacles glasses. Most of last week's layoffs were marketing roles within the hardware division. In short, this isn't why the stock took a hit.
Snap is naturally still trading higher than last month's low. It's still growing, though not as quickly as it was before its IPO. The sell-off last week is overdone, but we're going to have to see more bullish signs out of Snap before anyone can legitimately tag this as a buying opportunity.
