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Why Snap Stock Popped Today

By Jeremy Bowman - Dec 29, 2020 at 11:27AM

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Shares of the Snapchat owner gained on an analyst endorsement.

What happened

Shares of Snap ( SNAP -0.73% ) were moving higher today on a bullish note from Goldman Sachs citing strong momentum and raising the investment bank's price target on the stock.

As a result, Snap shares were up 10.5% as of 10:11 a.m. EDT on Tuesday.

A man in the street looks at his smartphone

Image source: Getty Images.

So what

Goldman Sachs analyst Heath Terry reiterated his buy rating on the stock and upped his price target from $47 to $70. Terry noted a number of tailwinds emerging since the company's strong third-quarter earnings report. First, it has introduced new features and tech innovations, including Spotlight, which highlights the most entertaining Snaps, and a new version of Lens Studio, its product for creating augmented-reality (AR) experiences, one of several products it rolled out at Lens Fest, its virtual AR conference earlier this month.

Terry also noted new product partnerships, including with Unity Software ( U -12.01% ) to integrate Unity's 3D ads with Snapchat. Since Unity is a popular tool for mobile games and Snapchat has bet its future in large part on gaming, the partnership seems like a natural fit.  

The analyst also said the overall advertising push should "further momentum in engagement growth as well as provide valuable scale to advertise."

Coming after a strong third-quarter earnings report that included revenue growth of 52% to $679 million, Terry expects the company to top fourth-quarter estimates in its upcoming report.

Now what

Snap has been a surprise winner this year, with the tech stock more than tripling as the company has demonstrated an ability to grow regardless of threats from Instagram and TikTok. It has also benefited from an advertiser shift away from Facebook after big companies declared a boycott against the social media giant and small companies have become frustrated with a lack of customer service.

That trend, along with an expected rebound in online advertising as the economy reopens, should deliver strong results for Snap in 2021 as well.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Snap Inc. Stock Quote
Snap Inc.
SNAP
$47.26 (-0.73%) $0.35
Unity Software Inc. Stock Quote
Unity Software Inc.
U
$151.68 (-12.01%) $-20.71

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