BARCLAYS: The perfect time to buy Snap will come after one key event
After seeing an initial pop in its first two days of trading, shares have been in a downward spiral ever since. The company recently broke below its $17 IPO price and hasn't stopped there, trading as low as $15.21 on Wednesday.
But, at some point, the stock will likely reach a price that becomes attractive for investors that see untapped value in the company's app and user base.
For those looking to buy Snap, waiting until after company insiders sell their shares could be an attractive entry point, according to a new note from Barclays.
"The negativity in the past few months around SNAP ahead of its lock up expiration is creating an opportunity in our view," Barclays wrote in a recent note to clients. "We would wait until the heavy lock up volume subsides to add to positions, likely sometime mid 3Q."
The lock up expiration keeps company insiders from selling their shares during the initial period following an IPO. The idea is to prevent a flood of selling by employees and others trying to get rich quick right at the same time the company is trying to convince investors it's shares are worth buying.
The lockup period for Snap ends on July 30, but will likely not materially affect prices until July 31 which is the first day markets will be open following the lock up's expiration.
When insiders are allowed to share their stakes, prices will likely drop, creating an opportunity for those looking to enter into a Snap position cheaply, according to Barclays.
Barclays thinks the underlying technology of Snap is strong, and that bumpy earnings results the company has experienced so far will smooth out as it matures. Snap has several technologies in the works that should improve revenue, like a self-serve ad platform. Barclays also thinks new tech features, like the map of users' friends, will provide more engagement and revenue channels for the company.
Barclays rates the company as a neutral for now and has a price target of $18.00, 17.2% higher than Snap's current price.
Since its IPO, Snap has fallen 37.69% and currently trades at $15.35.
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