Snap Inc. (SNAP) experienced soaring growth over the last ten months, significantly outperforming the S&P 500. The camera and social media company’s stock rose by approximately 357.0% since the start of 2020 compared to the S&P’s gain of about 39.1%. Given this astounding level of growth, it is understandable to see hedge funds and institutions actively buying.
Snap is widely known for its technological products and services, such as the Snapchat application for smartphones and Bitmoji, personalized cartoon avatars. Snap also recently announced augmented reality smart glasses geared towards developers, called Spectacles. Snap originated as a camera company, utilizing its Snapchat camera app to connect people through a playful medium and sell advertising space. It ultimately grew into a strong player in the social media industry, focusing on empowering self-expression, increasing communication among family and friends, and general entertainment. While Snap experienced a decline in value during the earlier stages of the coronavirus pandemic, the stock has seen rapid growth in 2021 with boosts in digital advertising spending and greater demand for advertising partnerships.
Hedge Funds Are Enthusiastic
Hedge funds and institutions heavily bought Snap’s stock in the second quarter of 2021. For hedge funds, the aggregate 13F shares held increased to about 219.7 million from 207.7 million, an increase of approximately 5.8%. Of the hedge funds, 41 created new positions, 71 added to existing ones, 40 closed out their holdings, and 45 reduced their stakes. Institutions were also purchasing the stock, and aggregate holdings increased by about 3.4% to approximately 830.4 million from 803.2 million. As a result, the stock was added to the WhaleIndex 100 on August 17, 2021.
Positive Multi-year Figures
Analysts expect to see earnings rise in 2021 and 2022 to an estimated $0.35 per share and $0.79 per share, respectively. Revenue estimates are also encouraging, predicting approximately $4.2 billion for December 2021 and rising to about $6.2 billion by December 2022. The 13F metrics between 2016 and 2021 are a good reflection of Snap’s ascending stock price and demonstrate the potential for the stock to continue on an upward trend, and institutional investors build longer-term positions.
Analysts Raise Price Targets
Snap’s shares are setting new records for the company, and analysts have taken notice. Brent Thill of Jefferies Group LLC was impressed by the recent performance and raised their price target on Snap to $90 from $81. Barclays Investment Bank raised its price target on the stock to $81 from $75. Also, Piper Sandler Companies noted that revenue was better than anticipated. Analyst Thomas Champion reiterated an Overweight rating and $85 price target on the stock.
Snap’s amazing growth is no camera trick or tweaked reality. Hedge fund activity is an encouraging sign for investors. While Snap has its fair share of competition from tech companies and social media platforms, it has been able to innovate, stay relevant, and leverage advertising demand. Second-quarter results impressed, and earnings estimates through to 2022 provide a positive outlook.