Snap Stock Breaks Out to New Highs Following Earnings – TheTradersWire

Snap Stock Breaks Out to New Highs Following Earnings

Snap Stock Breaks Out to New Highs Following Earnings

By Justin Kuepper | February 7, 2018 — 11:55 AM EST

Snap Inc. (SNAP) shares surged more than 40% in early trading on Wednesday after the company reported favorable fourth quarter financial results. Revenue rose 72.4% to $285.69 million – beating consensus estimates by $32.74 million – and net losses of 13 cents per share beat consensus estimates by three cents per share. Shares rose in after-hours trading before opening sharply higher and rising during Wednesday’s session.

Aside from the top-line financials, user growth exceeded analyst expectations with a 5% increase over the previous quarter. Average revenue per user rose 46% year over year to $1.53, while the cost of revenue per user rose 5% year over year to $1.02. The company had cash and equivalents of just over $2 billion by the end of the year, with its fourth quarter cash burn reaching nearly $200 million. (See also: Snap Crosses IPO Price After Adding Nearly 9 Million Users.)

Technical chart showing the performance of Snap Inc. (SNAP) stock

From a technical standpoint, the stock broke out from trendline and R2 resistance at $16.25 and longer-term trendline resistance at $18.00 to its highest levels since last summer. The relative strength index (RSI) moved to overbought conditions at 80.91, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal more upside ahead over the coming weeks and months.

Traders should watch for some near-term consolidation, given the overbought RSI readings, above $18.00 support levels. After a period of consolidation, the stock could move higher to test its next major trendline resistance levels at around $22.00, which were set back in June of last year. Analysts remain mixed, with Bank of America Merrill Lynch upgrading the stock with a $24.00 price target and Susquehanna downgrading the stock with a $7.00 price target. (For more, see: Snap’s VP of Product Announces Exit Amid Crucial Redesign Rollout.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Wed, 07 Feb 2018 16:55:00 +0000

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