- RBC Capital Markets analyst Mark Mahaney has a theory for why Snap shares surged almost 50% on Tuesday.
- When sentiment on a stock is negative and the company shows that it's at an "inflection point," the stock skyrockets, he told Business Insider.
- Snap's app redesign and new-and-improved advertising technology could drive sustainable growth.
ADVERTISEMENT
Snap may have hit 'an inflection point' (SNAP)
RBC Capital Markets analyst Mark Mahaney explains why Snap's stock price surged almost 50% on Tuesday.
ADVERTISEMENT
Recommended articles
Snap shares ballooned to above $20 apiece Wednesday after it reported blockbuster fourth-quarter results. That's an almost 50% increase.
The dramatic increase partly resulted from a short squeeze, when short sellers betting against the stock wanted to cover their positions by buying back shares. Short sellers lost $375 million Wednesday because of Snap's huge gains, according to a note from S3 Partners.
But Mark Mahaney of RBC Capital Markets isn't surprised.
ADVERTISEMENT
"This is what happens to a stock when sentiment is overwhelmingly negative, expectations are super low, and the company shows what seems to be an inflection point," he told Business Insider.
For most of January and leading up to the earnings results, Snap's stock sat at around $13 apiece. After earnings results, shares spiked to just above $18 in after hours trading, and continued on up Wednesday.
Snap reported fourth-quarter earnings on Tuesday, which showed revenue of $285.7 million, which beat Wall Street expectations. The results also showed earnings per share of -$.13, beating expectations of -$.16. A
"The results from yesterday are sustainable," he said. RBC raised its price target from $15 to $21.
Mahaney said in a note that the "early testing of the new app redesign is causing gains in engagement and ad performance," adding that in one of Snap's first test runs, "the company saw the number of Daily Active users watching Publisher Stories on Discover grow by over 40 percent when compared to the old design of the application."
ADVERTISEMENT
Snap's transition to an advertising auction platform is almost over, "and the number of advertisers is doubling Y/Y- so ad pricing has a lot of upside ahead" Mahaney said in the note.
FOLLOW BUSINESS INSIDER AFRICA
ADVERTISEMENT
Recommended articles
Offshore sportsbooks and best sports betting sites
Top 5 African cities with the most unaffordable real estate in 2024
US says it is still engaged with West African juntas
Opinion Piece: Accelerating sustainable development goals through better agricultural risk management
Zimbabwe is set to honor Russian victory with a monument
Top cross-border payment companies in Africa on recent global ranking
Studio Monkey in collaboration with Worldwide FM and Gilles Peterson launches initiative to support grassroot music communities
NexaScale marks one-year milestone with visionary initiatives empowering Africa's youth for the future of work
