Is the Snapchat share price a buy at current levels?

[MongiIG]

The Snap Inc. (Snapchat) share price has responded well to restructuring and revenue guidance

Source: Bloomberg

 

Shares Snapchat Price Snap Inc. Revenue Augmented reality

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 08 September 2022 

Snap Inc. (Snapchat)

Key points:

• Snap share price has started to rebound from oversold territory
• The group is currently restructuring its workforce
• Revenue growth of 20% is targeted in 2023
• The average broker rating for the stock is ‘hold’
• Most IG clients with open positions on the stock expect the price to rise in the near term
• The share price currently trades in a broad rangebound environment

Snap Inc. share price outperforming in the near term

Snap Inc. the mobile, image and camera application business has seen its share price rebounding sharply off near-term lows.

The 30% rally off its worst levels in two and a half years finds place while its Nasdaq listed peers and broader equity markets have been under pressure. The move does however correlate with recent news from the group.

Snapchat restructuring and layoffs

Snapchat announced that it will be restructuring its workforce as it looks to reprioritize its business to core areas. The areas considered a priority by group CEO Evan Spiegel, include ‘community growth, revenue growth, and augmented reality’.

The group will look to lay off around a fifth of its staff at a cost of up to $175m which would reflect in Q3 results. These costs would pertain to redundancies and contract terminations.

Snap Inc. looks to increase user base and revenue significantly in 2023

The company has recently guided that it will look to increase its user base by nearly a third and in turn grow revenue by a further 20%. Augmented Reality (AR) provides a key component to revenue with the aim of having the category contribute to around 10% of total sales.

How to trade the Snap Inc. share price

Source: Refinitiv

The share price of Snap Inc. currently carries a hold recommendation (as of the 8^th of September) from a consensus of 43 analysts surveyed by Refinitiv. The current price trades at roughly a 50% discount to the long-term price target mean from these analysts.

Source: IG

As of the 8^th of September 2022, 92% of IG clients with open positions on the stock expect the price to rise in the near term, while 8% of these traders expect the price to fall.

Source: IG Charts

The share price of Snap currently trades in a broad range bound environment between levels 8.85 and 15.85. In the near term we have seen a sharp rebound off the lows of this range support. Traders who are long might consider trailing their respective stop losses to a close below the 10.55 level whilst using the 12.75 as the next upside target from the move higher.