- Snap Inc. stock has been ghosted by bulls
- Positive business developments and SNAP’S price chart point at a discounted growth situation
- Millennials and Gen Z’ers may benefit from buying SNAP stock
Investing in what you know is a popular strategy on Wall Street. In recent weeks, however, buying risk assets no matter their size or reason for existing has been a wildly-favored trade. And the action hasn’t been lost on Snap Inc’s (NYSE:SNAP) SNAP stock.
SNAP shares have gained north of 35% at their best over the past couple weeks. That is roughly triple and even quadruple returns captured in the broader, large-cap market bellwethers. It is also hardly surprising.
Since peaking in late September at $83.34, SNAP has lost as much as 70% as collateral damage in a pervasive risk-off rotation out of higher multiple growth narratives.
In return, as the broader market rallied smartly out of its own modest but unnerving correction and taking most every stock along for the ride, Snap shares were a prime candidate for bargain-hunting.
Whether this is a new bull cycle or simply a dead cat bounce, already we are seeing some pressure. It is about time for SNAP stock to reappear or make a first impression in your portfolio.
| SNAP | Snap Inc. | $37.47 |
A Very Bullish Q4 Snapshot
Snap Inc. is the parent company behind the camera-driven, mobile-based, “now you see it, now you don’t” social media platform Snapchat with the well-known ghost logo.
If you’re of a certain age or demographic that fits in the Millennial or Gen Z spectrum, there is a solid chance Snapchat is part of your daily routine. There is no judgment from this Gen X’er. But I would be disappointed if you’re not considering Snapchat’s SNAP stock in your portfolio following early February’s earnings report.
Snap’s fourth quarter (Q4) showed all-around solid operating results for the company. Among the highlights, as InvestorPlace’s Mark Hake notes, SNAP delivered an impressive second straight quarter of free cash flow (FCF). Not only that, the $161 million amount is more than triple the prior quarter’s FCF of around $52 million.
There is more, too.
SNAP stock also returned to profitability following an iOS advertising change by Apple (NASDAQ:AAPL), which Snap had to navigate. And it nearly doubled its unadjusted earnings to more than $326 million.
Last but not least, it would be silly to turn a blind eye to Snap’s year-over-year Q4 sales growth of 42% on revenues of $1.3 billion.
SNAP Stock’s Disappearing Bear
Invest or buy what you know or use. It is a strategy popularized by legendary Fidelity fund manager Peter Lynch. And the way I see it, it should be appreciated by a whole new generation of investors in SNAP stock.
Importantly, if you’re one of Snapchat’s younger users, a bearish cycle in SNAP is poised to disappear and offers a well-discounted share price with significant upside potential.
With the calendar month of March coming off the board and April making its appearance, SNAP stock is positioned within a well-supported bullish inside hammer pattern.
The reversal formation is wedged in between the share’s lifetime 62% and 76% retracement levels.
Combined with testing of Snap’s prior cup-shaped breakout and stochastics sporting a bullish monthly stochastics crossover in oversold territory, the odds for a meaningful low in the stock look really good.
Buying SNAP Stock More Wisely
As hinted above, buyers of SNAP won’t find me making any purchases. That should be okay though. Snapchat isn’t my bag. But if you’re part of Snapchat’s demographic and willing to listen to your elders, I’d suggest a little patience prior to making a purchase.
With the broader market now returning some of the past couple week’s gains, there is a strong chance buyers will be able to purchase SNAP stock at a stronger discount within the March candlestick.
Make no mistake, while the month was less volatile than February, buying on strength and through the candle’s high is risky in relation to the pattern’s low.
I’d also advise using SNAP’s options for managing risk.
However you decide to buy into Snap, hedging that exposure with calls and puts can prevent the possibility of other investors ghosting a bullish situation.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
