The market's most feared short-seller is bullish on Snap and says it could be bought within the next year
- One of the market's most notorious short-sellers, Citron Research's Andrew Left, is bullish on Snap. He has a price target of $17.
- Left says the company could be bought within the next 12 months.
- Snap shares have been battered this year, down 22%.
- Watch Snap trade in real time here.
The provocative short-seller, and founder of Citron Research, Andrew Left, is back at it again. Except this time he's bullish.
Left, perhaps best known for his damning October 2015 report that accused Valeant Pharmaceuticals of being a "pharmaceutical Enron," and helping bring up questions regarding the firm's accounting and relationship with the specialty pharmacy Philidor, thinks Snap is going to $17 a share, or roughly 68% above current levels.
"For the past 4 months, Snap Inc. has been a wonderful short as the company has suffered from a controversial redesign, a disappointing quarter, and management which held a conference call that Jim Cramer likened to an SNL skit," Left wrote in a note on Thursday. "And Snapchat's stock has the scars to show it, being down almost 50% over this period."
But now he believes the company is "one stabilizing quarter from giving investors a 30% or more return -- more than you can see in any FANG stock in our opinion." He added, "You cannot ignore the size, scale, and reach of the product which has the mindshare of the most important demographic in the market."
Left hangs his call on Snap's relatively fast revenue growth and cheap multiple compared to its peers. He says Snap is trading at three times its revenue, compared to Twitter's five times and Facebook's six times. "Snap is now trading at its largest-ever discount to social media peers despite generating the fastest revenue growth," he said.
Plus, he mentioned Snap's market cap is smaller than Twitter's, despite having more users. "Snap currently has half the market cap of Twitter despite having more users," he said.
Left expects those numbers, and advertising impressions to grow. "Ad impressions up up and away," he wrote, citing that a 70% year-over-year drop in ad prices took focus away from a 575% ad impression growth rate, a key metric.
In his opinion, all of this means bad news for the shorts.
Short interest has risen considerably since Snap went public in March of 2017, and the company is one of the most shorted companies in the entire US application software sector. As of Wednesday it sat at $1.29 billion, or 22.74% of the float, according to data from financial analytics firm S3 Partners.
"Google could easily give Snap the "grownup" it needs while also saving close to $100 million," he said. "Although we now find out that SNAP has plans for profitability in the neat 12 months, we still question if it will remain independent for that long ."
Snap is down 22.11% this year.
