Snap Inc. (SNAP) The stock hit an all-time high on Wednesday after the company significantly beat top and bottom line estimates for Q3 2020. The company posted earnings of $ 0.01 per share, $ 0.06 better than expected, while revenue rose a staggering 52.1% year over year to $ 678.67 million and consensus increased by more than $ 120 million. USD surpassed. Daily average user Growth (DAU) also achieved impressive results, increasing 18% over the previous year.
At least 15 analysts raised target prices after the release, with the new street high at $ 50 highlighting a significant shift in sentiment that should translate into much higher prices. The majority of enthusiastic comments pointed to this E-commerce Strength and large media advertising as the main reasons for the percentage sales growth. The sought-after younger population group offers unique benefits, especially during the pandemic.
Snap added personalized public profiles and user-accessible advanced analytics in September that should continue to act as positive catalysts. The messaging company is also benefiting from the ongoing TikTok drama, with many subscribers to the app opening new Snap accounts to “kick the tires” if acquisition negotiations fail and the US government bans the Chinese company for security reasons.
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Snap Daily Chart (2017-2020)
The company went public at $ 24 in March 2017, starting with a two-day advance that stalled near $ 30. The shaft then turned the tail and cut through the opening pressure of the initial public offering (IPO) and into a two-legged decline that was initially noted support in their upper teens. That low was broken in June and fell to $ 11.28 in August. This level provided a trading floor for a breakdown in May 2018.
The downtrend hit an all-time single-digit low at the end of the year, sparking a recovery wave that stalled in the third quarter of 2019 in the senior teens. It broke out above that level in January 2020, but the rally failed. This resulted in a sharp drop in February 2019 gap near $ 8 before a vertical reversal completed a round trip to previous high. The stock broke out instantly and remained within a few points of its June 2017 high.
Short term outlook
A retreat into August found support over the 50 days exponential moving average (EMA) in the low 20s, giving way to a steady spike towards $ 30 pre-earnings, followed by a large breakout gap on Wednesday morning. The placement of the gap is nearly perfect for additional identification as a “continuation gap” which often identifies the center of a gap Elliott five-wave Rally stopped. As a result, that advance could easily become an upward target by the mid-1950s.
More importantly, large volume breakout and continuation gaps are rarely closed immediately, reducing the likelihood of a deep retreat, while an aggressive momentum strategy may be required to get on board at an advantageous price. A 20 day Bollinger Band® can be a useful tool in this regard, standing aside until a short-term downturn or consolidation pattern is reached within striking distance of the median ligament.
The bottom line
Snap stock broke above its 2017 high after a blowout quarter and could hit the $ 50 mark in the coming months.
Disclosure: The author held no positions in any of the above securities at the time of publication.