Snap stock rises after an analyst issues a ‘buy’ rating for the first time
Snap Inc.’s stock rose Monday after receiving its first “buy” rating from a Wall Street analyst, providing some relief from a downward trend.
Trading in the company behind the Snapchat app began with a bang March 2. When the shares hit the New York Stock Exchange that day, they opened at $24, more than 40% above the initial public offering price of $17.
The shares rose as high as $29.44 on the second day of trading, but began to decline steadily after that, as analyst after analyst issued “sell,” “underperform” and “hold” ratings.
Midday on Friday, the stock hit a low of $18.90.
That trend saw a reversal Monday, when James Cakmak, an analyst with Monness, Crespi, Hardt & Co., issued a “buy” rating for the stock and gave it a target price of $25. Snap shares rose 2% to $19.93.
“We recognize we are potentially giving too much credit for unproven skills in building a business, rather than just a product,” Cakmak wrote in a note to investors, “but we see more to Snap than many suggest.”
He also said he expected high user and revenue growth, estimating that the company would expand its user base tenfold in the next three years.
By contrast, several analysts who initiated coverage of the stock shortly after it began trading said Snap was overvalued, setting target prices of $10 to $23. Those analysts argued that the company has high costs, faces stiff competition for ad dollars and users from companies such as Facebook Inc. and has limited potential for growth.
Another concern to some investors is that all of Snap’s publicly traded shares are nonvoting shares. Co-founders Evan Spiegel and Bobby Murphy wield an outsized amount of power over the company.
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