Deal-seeking bottom feeders are starting to prop up Snapchat's parent company. Shares of Snap Inc. (SNAP +4.65%) rose 12.47% last week, moving higher after Deutsche Bank analysts Lloyd Walmsley and Kunal Madhukar put out an encouraging research note. Momentum had started building a week earlier when Citron Research -- historically a boo bird in its missives -- turned bullish on Snap stock.
Walmsley and Madhukar are feeling more confident about the social platform's daily active user growth. Advertisers also aren't shying away from Snapchat given the latest data on its self-serve ad offering. Deutsche Bank continues to have a neutral rating on Snap as a result of a lack of valuation support and low estimates, but with so few truly bullish analysts following Snap, it's notable when even one with a hold rating puts out a note about many of the positives.
Image source: Snap Inc.
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Snap stock is rolling, closing higher in seven of the past eight trading days. Citron's report two weeks ago suggesting that the stock will rise to $17 helped spark the rally, but now momentum is taking over.
A lot of things were dogging Snap on the way down since peaking in February. A brutal first quarter sent the stock plummeting in early May, something that has happened in all but one of Snap's first five quarters as a public company. Snapchat also came under fire following a poorly received app redesign that was widely criticized by its users. Notable celebrities and blogging tastemakers also lashed out at new and not-so-improved Snapchat.
Snapchat decided to reverse the most controversial component of its redesign last month, but the news was buried in the exodus of investors following the rough quarterly report. Snap was an out-of-favor investment, but will eight trading days that were nearly unanimously buoyant turn that sentiment around?
Snapchat remains a popular and viable social platform. Instagram may be eating its lunch in more ways than one, but social media has never been a winner-take-all niche. Snap's app has a stranglehold on a large enough group of young users who are successfully dodging old-school marketing missives, making it a great way for advertisers to get noticed by jaded Generation Z consumers. There were a record 191 million daily active users on the platform in the first quarter.
From helping SeatGeek drum up event ticket sales, to landing cable network giants the young viewers that they crave in order to survive, Snapchat is growing despite the lack of respect it has historically garnered on Wall Street. But even after the recent rally, Snap stock remains 23% below last year's IPO price. The recent bullish momentum is nice, but Snap has a long way to go before it truly lays its "broken IPO" tag to rest.
