Snap Stock Gets Upgraded on Video Game Potential

There's still tons of skepticism surrounding the social media stock

Managing Editor
Sep 3, 2019 at 9:52 AM
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When we last checked in with Snap Inc (NYSE:SNAP), the social media stock was preparing for its turn in the earnings confessional. Now, the shares are up 1.6% to trade at $16.06 this morning, after Evercore raised its rating on SNAP to "outperform" from "in-line," while boosting its price target to $20 from $18. The analyst in coverage glowed about the company's foray into the video game sector, expecting it to be an avenue for incremental growth

Snap stock roared to an annual high of $18.36 on July 26 but struggled in August, shedding 5.9% for its first monthly loss of the year. However, the shares found support at their 50-day moving average, a trendline only breached once since May. 

Today's bull note runs counter to overall analyst sentiment. There are 25 brokerages covering SNAP, and 19 rate it a "hold" or "strong sell." Plus, the equity's 12-month consensus price target sits at $16.38, just a chip-shot from its current perch.

That same skepticism is felt among short sellers, where short interest increased by 9.2% in the two most recent reporting periods. The 102.86 million shares currently sold short is the most since mid-March, and accounts for 14% of SNAP's total available float and 3.4 times the average daily trading volume.

Regardless of motive, traders should consider speculating on SNAP with options. The equity's Schaeffer's Volatility Index (SVI) of 44% sits higher than just 8% of all other readings from the past year, suggesting near-term options are attractively priced at the moment. Further, the security has certainly been an attractive target for those buying premium during the past year, in the sense that it's made bigger moves than what the options market was pricing in. This is according to the security's elevated Schaeffer's Volatility Scorecard (SVS) reading of 98 out of a possible 100.

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