Pivotal: Snap No Longer A Sell, But Stock Could Still Fall


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Shares of social media company Snap Inc (NYSE:SNAP) briefly fell below $9 per share Wednesday and are now trading at a more balanced risk-reward profile for the longer-term, according to Pivotal Research Group. 

The Analyst

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Pivotal's Brian Wieser upgraded Snap from Sell to Hold with an unchanged $9 price target.

The Thesis

When Snap began trading for the first time in early 2017, multiple risks were evident, including "underwhelming" user and usage trends along with a younger audience niche, Wieser said in the upgrade note. (See the analyst's track record here.) 

At the company level, Snap's management led a "suboptimal corporate structure" with the absence of the necessary skills needed to transition a new product into a successful company, the analyst said. Snap was more akin to a venture-stage entity rather than a mature public company — a reputation that arguably still holds true today, he said. 


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Yet the stock has fallen to Pivotal's $9 price target, which was first established in May 2017 and lifted to $10 in January 2018 before being dropped back down to $9 in April, which implies the bearish case for the stock is unjustified. 

Today's trading level "appropriately balances" near-term downside risks with longer-term potential, including the following, Wieser said:

  • $2.8 billion in revenue in 2022.
  • A long-term 30-percent adjusted EBITDA margin.
  • $500 million of combined capex and acquisitions.
  • Cash flow of around 16 percent of revenue.
  • Declining costs of capital as the company matures.

Price Action

Snap shares were trading down 0.11 percent to $9.19 at the time of publication premarket Thursday. 

Related Links:

Jefferies Cautious On Snap, Says Trends Are 'Not Encouraging'

Wedbush Turns Bullish On Snap, Expresses Increased Confidence In Corporate Governance


27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsadvertisingBrian WieserPivotal Research GroupSnapChatsocial media