Snap (NYSE:SNAP) stock has been downright explosive so far this year. Its July earnings report is only adding to the gains.
Snap stock was up about 170% heading into its quarterly results. After posting its second-quarter results though, the shares will be embarking on a triple — 212% gain — for 2019.
It’s joining Roku (NASDAQ:ROKU), Shopify (NASDAQ:SHOP) and other monster performers boasting big gains on the year.
But it leaves one question for investors: Is there still time to buy? Ironically, Snap stock is only up about 10% over the past 12 months. It helps that you couldn’t pay investors to buy Snap in late-2018, setting up the monstrous start to 2019. Let’s take a deeper look.
Snap Stock Earnings
The company reported a Q2 loss of 6 cents per share, topping analysts’ expectations by 4 cents per share. Revenue of $388 million surged 48% year-over-year and cruised past consensus estimates by almost $30 million.
Daily active users came in at 203 million, up 8% year-over-year and 6.8% sequentially. The user growth was recorded in the U.S., Europe and internationally, while activity on the platform increased as well.
I guess the raised price target from Bank of America Merrill Lynch based on stronger-than-expected user growth was spot on. That came on July 11th, but wasn’t the only bullish sentiment ahead of the report.
On Monday evening and Tuesday morning, Snap stock received two upgrades. Stifel and Rosenblatt analysts both took Snap to a buy rating and raised their price targets to $17 and $18, respectively.
Not all that far from the former now, investors want to know if Snapchat stock can reclaim its $17 IPO price.
Trading Snap Stock
Snap stock has been trading really well since February. The stock erupted over $7 and has been on a mission ever since. After clearing its newly-established 100-week moving average, shares have been guided higher by the 10-week moving average.
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Snap stock is running into its $17 IPO price, while its 50% retracement for the entire multi-year range is up at $17.13. It’s also trying to breakout over channel resistance (blue line), which has been in play since March.
If it can breakout, Snap stock could run even further. I would target the next retracement level — the 38.2% — at $20.04. Above that and the 2018 high near $21.20 is on the table.
If $17 ends up acting as resistance, let Snap stock pullback and consolidate. Digesting these big gains is far from unhealthy. See that it holds the 10-week moving average from here.
Bottom Line on Snapchat Stock
Not all is perfect with Snap stock, and the quarter doesn’t necessarily make it a better buy than Twitter (NYSE:TWTR) or Facebook (NASDAQ:FB) at this point. But one thing is certain: the stock has momentum on the bulls’ side.
Free cash flow and operating cash flow are still negative and Snap still can’t turn a profit. That said, net losses are falling, while FCF and OCF are clawing their way toward break-even. Even though total liabilities have increased 63.5% in just six months to $659.3 million, the column is dwarfed by Snap’s total assets of $2.76 billion (up 2.2% over the same period).
The analysts are getting on the bull train too. Rosenblatt analysts — who just upgraded the stock, remember — pushed their price target from $18 the other day to $21. UBS moved their price target from $8 to $16, while Summit increased to $20. Pivotal went up to $20.50 and Bank of America Merrill Lynch went to $18, while others moved higher as well.
The metrics are improving and the hope among bulls is that fundamental improvements will come next. For now, follow the charts. Over $17 opens the door to higher prices. Below keeps the trend intact.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long ROKU and SHOP.
