One of Snaps biggest bears admits he was wrong, but still thinks shares will plunge by 30%

Evan Spiegel

  • Snap bear and Morgan Stanley analyst Brian Nowack has grown more positive on the company, but still thinks shares have 30% downside.
  • He raised his price target to $8.50 a share after the stock has gained 115% this year.
  • Nowack was one of the biggest Snap bears on Wall Street, previously having a price target of $5.50.
  • Watch Snap trade live.

Snap shares have run up more than 100% this year, causing one of the company’s biggest bears on Wall Street to change his view on the stock.  

“Snap is executing at a higher level but we believe its ~120% multiple expansion YTD captures these improvements,” wrote Morgan Stanley analyst Brian Nowack. He added that the bank’s discounted cash flow-based price target “still has 30% downside,” while raising his price target from $5.50 to $8.50 a share. Ahead of the change, just two Wall Street analysts were more bearish on the company’s prospects, both with price targets of $5. 

“We remain underweight until we find further evidence of faster-growing users (watching app downloads and third party data) and/or further improving advertising trends,” he said. 

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Nowack raised his financial projections and noted Snap has experienced tangible improvements to its business. Those include green shoots in advertising, improvements in engagement, and a more stable user base. In addition, the company has continued to innovate with a new focus on expanding its platform to gaming.

Nowack said the key risks to his thesis include better-than-expected user growth from the recent re-launch of the Android Snap app, and better-than-expected monetization of the company’s core Stories platform.

The rebound in Snap’s share price comes after a period of intense volatility for the company. At one point in December, its stock price was down more than 70% from its initial-public-offering price of $17 a share. Since its IPO, more than 20 senior executives have left the company. 

And Snap’s problems don’t stop there. A report out this week from The Financial Times calculated the social-media network will run out of cash within three years if revenues don’t pick up.

Snap shares were up 115% year-to-date.

Snap stock chartMarkets Insider

 

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