Please ensure Javascript is enabled for purposes of website accessibility

Can Snap Stock Keep Going After Last Week's 12% Pop?

By Rick Munarriz - Oct 16, 2017 at 11:10AM

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 company has set a date for its next quarterly report. It has two strikes in its first two reports as a public company, and it can't afford to strike out.

Things keep looking up for Snap, Inc. (SNAP 4.59%) investors. Shares of Snapchat's parent company rose 11.6% last week, moving higher after a pair of bullish analyst moves. The stock hit a three-month high on Friday, closing within pocket change of its wintertime IPO price. 

Stephen Ju at Credit Suisse pushed his price target from Snap's IPO price of $17 up to $20. Ross Sandler at Barclays isn't as bullish -- he's sticking with his "neutral" stock rating and his $13 price target -- but he did concede that he's starting to warm up to the stock's improving fundamentals. 

Person on the Snapchat app walking in front of a Snap billboard.

Image source: Snap, Inc.

Snap out of it

Snap also announced on Thursday that it will report its third-quarter results on Nov. 7. It's going to be a big quarter. Analysts see Snapchat's owner growing its revenue to $240 million, 87% ahead of the $128.2 million it scored a year earlier. Wall Street pros are bracing for a loss of $0.15 a share, but that's not a big deal since they're not expecting a profit out of Snap until 2020 at the earliest. 

Snap needs a strong quarter to keep the recent bullish momentum going. Its first two quarterly reports were disappointing, and investors have paid the price. The stock plummeted 21% the day after the company posted its first financial results as a public company in early May. The stock took another hit three months later, after the company posted another period of decelerating growth for the second quarter.

One of the pain points in the second-quarter report was weaker-than-expected growth in daily active users, but that doesn't appear to be the case this time around. Credit Suisse's Ju boosted his price target last week after reassessing his forecast for North American daily active users. He now sees a sequential uptick of 3.2 million users during the third quarter in Snap's home turf, more than double the 1.5 million he was originally targeting. 

Barclays' Sandler isn't as bullish on Snap stock, preferring to stay on the sidelines until after we see the next month's quarterly report play out. However, he does see the potential for big long-term gains if Snap is able to string a few positive quarters together. Sandler is seeing an encouraging advertiser reception to Snap rolling out an auction-based self-serve platform to get their marketing missives in front of Snapchat's young audience. 

Momentum is turning. The stock began this week trading 59% higher than its August low. Last week's rally was nice, but next month's quarterly report holds the key to the stock's near-term direction.  

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

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
$11.62 (4.59%) $0.51

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

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.