The Snap stock price made a strong comeback in extended hours after the company published strong quarterly results. It rose by as much as 60% and ended the day at $39.
Snap bounces back
Snap has been a company under pressure in the past few months as investors worried about the company’s growth.
Three months ago, the stock crashed by over 30% after the social media player published weak earnings. As a result, the stock retreated by about 70% from its highest point in 2021.
The regular session on Thursday was another tough one for SNAP shares as they crashed by 25% following the weak earnings by Facebook. It plummeted by 20%. The situation changed after the regular session ended as the stock rose by 60% following strong results.
Snap investors have been concerned about three things. First, there have been worries about the recent iPhone update that allows people to manage their privacy settings. As such, it has been difficult for advertisers to target adverts.
Second, the ongoing supply-chain challenges have affected many companies that advertise on Snap and other social media firms.
Finally, there are concerns about the growing popularity of TikTok, the Chinese social media company. The firm has been so popular among young people, which has forced more advertisers to shift to its platform.
Snap earnings review
Snap had a strong fourth quarter. In its results published on Thursday, the firm said that its total revenue surged by 42% year-over-year to $1.3 billion. That happened as the number of daily active users in North America rose to 97 million. In Europe, they jumped to 82 million while in other markets they reached 140 million.
Snap had an EBITDA of $327 million in the fourth quarter while its free cash flow rose to 161 million. In total, its revenue grew to $4.1 billion in 2021.
There were other notable takeaways in the company’s earnings. For example, stock-based compensation jumped to $77 million while its outstanding shares rose by 4.4%. In its balance sheet, cash and equivalents rose to $3.7 billion.
According to the management, Snap is working on ways to improve targeting in Apple devices while the supply chain challenges remain.
Is Snap a good buy?
Analysts have been generally positive about the Snap stock price. According to Marketbeat, the average target for the stock is $67, which represents a 175% upside from its close on Thursday. Analysts at Stifel have a price target of $45, while those at Credit Suisse expect that the stock could rise to $81. Similarly, those at Truist and Bank of America have a target of above $50.
Meanwhile, data compiled by Tipranks shows that analysts have an average target of $56.37. 15 of the 20 analysts covering the company have a buy rating. Further data compiled by WeBull reveals that the average estimate among analysts is $61.
Snap stock price analysis
The daily chart reveals that SNAP’s shares have been in a major sell-off in the past few months. It closed at $24.50 on Thursday as most social media stocks retreated after Facebook’s earnings. With the stock expected to open at $39, it means that it will cross the 25-day and 50-day moving averages. The Relative Strength Index (RSI) and MACD have also pointed higher.
Therefore, there is a possibility that the stock will continue its bullish trend in the near term as bulls target the key resistance at $50.
