Snap (NYSE:SNAP) Gets Rating Boost From Wells Fargo After 13% Gain
The coronavirus (COVID-19) outbreak and uncertainty in global oil markets have hit markets hard, with major indices in the United States and Europe struggling to reverse drops. Out of the four days of trading this week, the Dow Jones, NASDAQ-100, Standard and Poor 500 have posted negative performance for the majority of trading hours despite the Trump administration's liquidity injections and rate cuts by the Federal Reserve.
Naturally, in such unprecedented times, most stocks will lose big chunks of value. These drops will create further investor uncertainty, which in turn will end up driving down indexes even further. What this means is that, for some stocks, even though they might have dropped significantly, their intrinsic value and fundamentals ensure that when these ill-fated times do pass away, those who buy right now are set to profit in the future.
One such stock is Snap Inc (NYSE:SNAP), believes Brian Fitzgerald of Wells Fargo, who's out with a new investor note sending the stock's price up by 6.65% in pre-market trading.
Snap Inc Sees Negative Price Target Revision and Rating Upgrade by Wells Fargo to Bring Stock in Line With Post-Coronavirus Environment
Being a company that operates primarily in the virtual or digital domain comes with its perks and disadvantages. The disadvantages cover a host of different concerns such as privacy and server-based disruptions that are not faced by other, traditional companies to a high extent. The advantages cover the facts that a good chunk of the business can be run through employees who are not required to come to a physical office, and that changes to the physical environment or operations (think quarantine) do not disrupt operations.
These points are also on Wells Fargo's mind, gauging by its fresh analyst note to investors. In the note, analyst Fitzgerald states that investors who're bullish and look to invest long term should find Snap an attractive offering given that the stock is down by 44% following the coronavirus sell-off.
Changes Based on Company's Operating Environment and International Exposure
Wells Fargo's new price target for Snap is $14/share, down from the firm's earlier $20 price target to reflect the coronavirus sell-off. The reasons behind Wells Fargo's belief that Snap is a good long-term investment include the fact that its operations are not dependant on many small and medium-sized businesses facing disruptions from a changing environment. Additionally, the bank also believes that Snap's under-exposure internationally will prove to be an important factor in its ability to weather the current storm and sail smoothly in the future.
One year return on Snap's shares at the time of publishing stands at -13.44% based on yesterday's close. As opposed to some other stocks which started to truly feel the heat from the coronavirus in late February, Snap started to take a beating early on. At the start of this year, the stock's price closed at $16.78 and over the course of the month peaked at a 2020 high of $19.75 on the 24th of January.
Since then, Snap (NYSE:SNAP ) has bled roughly 52% of this value after closing at $9.47/share yesterday. In its latest fiscal quarter, the company earned $561 million in revenue, making for 13% top-line growth. In net income, the platform continued to report a loss, which grew by 6% to stand at -240.7 million.
For the fiscal year 2019, Snap's top line grew by 45% to report $1.7 billion in revenue. The company's net loss also dropped to roughly $1 billion from the $1.2 billion Snap reported in its fiscal year 2018. In addition to setting a new price target, Wells Fargo has also upgraded Snap to Overweight from an earlier Equal-Weight rating, implying that the bank believes that the stock offers greater value than other, lesser-weighted stocks.
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