Don't look now, but one of this year's most ridiculed broken IPOs is on the cusp of fixing itself. Shares of Snap, Inc. (NYSE:SNAP) closed at their highest level in more than three months on Wednesday. Snapchat's parent company closed at $15.98, rallying distance to get back to its IPO price of $17.
Snap stock rose 11.4% on Wednesday after a bullish analyst raised his profit target after updating his outlook for the social media speedster. Stephen Ju at Credit Suisse -- whose price target previously matched Snap's IPO price -- is bumping his goal to $20 just ahead of next month's quarterly report. Ju's modeling 78.2 million daily active users in North America for the quarter that ended last month, 3.2 million more than it had at the end of the second quarter. He was previously targeting a sequential gain of just 1.5 million daily active users. Ju now sees Snap posting a deficit of $0.18 a share on $227.9 million. Wall Street's actually holding out for just a loss of $0.15 a share on $240 million in revenue, but Ju's earlier top- and bottom-line forecasts used to be even lower. He's ramping up his valuation parameters through the end of next year.
Ju is sticking to his outperform rating, adding fuel to Snap's recent rally. The shares have soared 41% since bottoming out in August. It's not fair to call Snap a market darling, but it's hard to dismiss a stock that has crushed the market over the past two months.
Snap back into action
Snap stock initially soared when it went public in early March, fetching as much $29.44 on its second day of trading. It was mostly downhill after that until finding a floor two months ago. When Snap shares moved 6% higher in August, it was the first time it had a positive month. It inched slightly higher in September, and now it's well on its way to its third consecutive month of gains.
Three straight monthly gains isn't making Snap the toast of the town, but getting back above $17 and a strong third quarter report in early November could do exactly that.
Ju isn't the first Wall Street pro to step up his price targets during the rally. Aegis and Cantor Fitzgerald began moving their finish lines higher back in August. Profitability remains elusive for Snap, and even the bullish Ju doesn't see Snap in the black until 2022. However, if fears of rival Instagram eating away at Snapchat's user growth was what tripped the stock up shortly after its Wall Street debut, the encouraging trends -- if Ju is right, at least in North America -- should hose down the bears. Snap stock already had a record 108.3 million shares sold short by the end of last month. If short squeeze catalysts are brewing, this could just be the start of the turnaround rally.