Tumbling to a price of $10.88 during today's trading session, shares of Snap Inc. are now -37.29% below their average target price of $17.35. Does this mean the stock will reverse course? Analysts are giving SNAP an average rating of hold and target prices ranging from $8 to $67 dollars per share.
To understand the market's outlook on the stock, we can look at Snap Inc.'s short interest: the proportion of the share float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 5.2% which means the outlook is split.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
Another way to gauge the sentiment on Snap Inc. is to look at the percentage of institutions that are invested in the stock. In this case, 62.6% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
Institutions have vast resources. If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
Reviewing the analyst coverage of a stock as well its short and institutional ownership percentages gives a glimpse of what the current market sentiment is on Snap Inc.. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about SNAP:
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It has a trailing 12 month price to earnings (Eps) of $-0.35 per share
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Snap Inc. has a trailing 12 month Price to Earnings (P/E) ratio of -30.8 while the S&P 500 average is 15.97
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he company has a Price to Book (P/B) ratio of 5.2 in contrast to the S&P 500's average ratio of 2.95
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Snap Inc. is a Communication Services company, and the sector average P/E and P/B ratios are 18.37 and 2.73 respectively
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