Snap's stock gained ground despite the market's big selloff thanks to buy rating



Hollis Johnson

Snap Inc. received its second "Buy" rating on Tuesday, an important vote of confidence after nearly a dozen Wall Street analysts have told investors to either sell or hold the newly-public company's stock.

The endorsement, from New York investment banking firm Drexel Hamilton, propelled Snap's shares up more than 2% on Tuesday, overcoming the widespread selloff that affected the broader market and which dragged down the Dow Jones Industrial Average roughly 238 points.


Snap's outperformance was especially notable, given that the stock has taken a beating in the several weeks since its IPO. Shares of the maker of the internet social app popped more than 40% on their first day of trading and soon neared the $30 level, but have trended downwards ever since.

Drexel Hamilton initiated its coverage of Snap on Tuesday with a buy rating and price target of $30.

Drexel Hamilton analyst Brian J. White painted a rosy picture of Snap's businesses in his note to clients, a copy of which was obtained by Business Insider. He also downplayed comparisons to other social networks like Facebook and Twitter.


"Snap is a very unique tech company that should not be pigeonholed in a particular industry, or investors risk missing the forest for the trees," according to White. "Snap views itself as 'a camera company' and we believe this fosters a mindset for innovation to transcend the boundaries of its competitors."

"We view Snap as a platform for the imagination that unlocks the creativity of its users and allows uninhibited expression with friends. Snap is a fun place to spend time which can be monetized."

White cited Snapchat's strength in augmented reality tech, which it currently uses to create interactive ads and overlay goofy effects over photos and videos. He also noted that "Snapchat has a cachet with millennials that will be difficult for other platforms to garner," and that there is "significant opportunity" for the app to catch on with older demographics and people outside of North America and Europe.


Snap makes most of its ad revenue from the US now, and eMarketer predicts that the company will generate $770 million in US ad revenue this year. Snap hasn't given its own revenue estimates for this year, but Goodwater Capital recently predicted that it would make $1.1 billion in total revenue in 2017.

Before Tuesday, Snap had one "buy" rating, five "hold" ratings, and six "sells."

Get the latest Snap stock price here.