- After a rough two years since its IPO, Snap’s stock is up 183% this year, outperforming every member of the S&P 500.
- Snap’s success is due to a focus on younger users, improvements in augmented reality and a maturing of its advertising business.
- Still, the company is losing hundreds of millions of dollars a quarter as it spends heavily on research and development.
After a rough two years following its IPO, Snap is trading within shouting distance of its $17 debut price from March 2017.
While hardly cause for celebration, considering a generic bet on the S&P 500 would’ve returned 25% during that same period, it’s quite a turnaround for a company that spent the bulk of last year in free fall, as users fled the Snapchat app and losses mounted.
Snap has since abandoned its effort to cater to everybody, and renewed its focus on young users, which remain a strength for the company and an area where it has a clear advantage over rival Facebook. Advertisers are finding more ways to reach those users and now have better tools to track their campaigns.
Investors are rewarding the company in a big way.
The stock price has more than tripled since hitting a record low of $4.99 on Dec. 21, closing at $15.61 on Friday. The shares are up 183% this year, trouncing every member of the S&P 500, whose top performer, Advanced Micro Devices, is up 80% in 2019.
“We believe product improvements and feature additions are driving positive trends in user growth and engagement that, along with monetization improvement from ad tech initiatives, should drive upside to consensus estimates,” wrote Goldman Sachs analysts, in a note to clients on Friday. They raised their rating to buy from neutral and boosted their 12-month price target to $18 from $13.
Other investment banks have made similar moves. Bank of America on Thursday raised its price target for Snap to $17 from $12, and last month BTIG increased its share price prediction to $20 from $15…