Please ensure Javascript is enabled for purposes of website accessibility

Is Snap Stock Going Down to $7 or Up to $18?

By Rick Munarriz - Dec 6, 2017 at 3:25PM

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

Two analysts have diverging opinions on which way Snapchat's parent company is going.

Analysts can be passing ships sometimes, and we saw that on display when two Wall Street pros put out divergent opinions for Snap Inc. (SNAP 0.30%) on Tuesday. The day kicked off with Ross Sandler at Barclays upgrading the stock from Equal Weight to Overweight, jacking up his price target from $11 to $18. Snapchat's parent company rallied on the news, but then Anthony DiClemente at Evercore ISI initiated coverage with an Underweight rating and a price goal of just $7.

sandler feels that next year could be the turning point for Snapchat. The long overdue app redesign should help, and he doesn't see why Snapchat can't co-exist with Facebook (META -0.76%) and Facebook's Instagram, with both companies thriving. DiClemente naturally doesn't see it that way, concerned that bullish analysts are being unrealistic with their revenue models given the way that Instagram is gaining in popularity at Snapchat's expense. 

Snapchat app on a phone with the Filters feature dolling up a snapshot.

Image source: Snap Inc.

Snap counter

Snap is a heavily contested tech stock, and there are going to be dissenting opinions on the volatile debutante. The social platform operator has had a wild rookie season since going public at $17 nine months ago. Snap stock nearly hit $30 on its second day of trading, falling to the pre-teens this summer. It's technically a busted IPO at the moment -- trading in the low teens -- but momentum appears to be building, with the stock higher in three of the past four months and rising so far in December. 

The naysayers are still there. Short interest shot up to 122.7 million as of mid-November, nearly a third of the stock's public float. Sandler at Barclays sees that as a good thing, opening up the possibility for a short squeeze since so many of the shares are in the hands of founders. However, the bearish DiClemente feels that staying away is the right approach since profitability could prove challenging given Snapchat's reliance on third parties to provide premium content. 

No matter where you stand, it's clear that there's a lot riding on the Snapchat app redesign, including a new dynamic Friends page and the bold move to separate social from media feeds. Snap had to do something. The dot-com speedster is still growing -- revenue soared 62% in its latest quarter -- but the market's walking away unimpressed. The stock has taken double-digit percentage hits following each of its first three financial reports as a public company. 

Snap isn't Facebook, but it doesn't have to be. The freshly bullish Sandler feels that next year's revenue targets will prove conservative, contrasting DiClemente's read on what lies ahead in 2018. Different opinions are fine, and given Snap's volatility it wouldn't be a surprise if Snap proves them both right by hitting $7 and $18 next year.

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
$13.17 (0.30%) $0.04
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$160.03 (-0.76%) $-1.22

*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
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

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.