Snap Inc. (SNAP) shares rose more than 8% during Tuesday's session after Goldman Sachs raised its price target from $47.00 to $70.00 per share – a 45% premium to Monday's closing price.

Key Takeaways

  • Snap shares moved sharply higher during Tuesday's session after Goldman Sachs boosted its price target to $70.00 per share.
  • Analyst Heath Terry cited several product developments and channel checks showing outperformance relative to fourth quarter guidance.
  • The stock is approaching overbought levels with a relative strength index (RSI) reading of 60.64, while the moving average convergence divergence (MACD) suggests an uncertain intermediate-term trend.

Goldman Sachs analyst Heath Terry believes that Spotlight, new ad campaign objectives and bid types, and the Unity Software Inc. (U) partnership have the potential to drive further momentum in engagement growth as well as provide valuable scale to advertisers. In addition, the analyst's channel checks suggest outperformance relative to the company's fourth quarter guidance.

A channel check is a method of independent stock analysis whereby company information is supplied by examining the company's distribution channels. Clients of the subject company are interviewed to see whether their purchases of the subject company's product or service have remained stable, increased, or decreased.

The move follows a collaboration agreement with Unity Software announced in mid-December that will extend the reach of Unity Ads to Snapchat advertisers and bring Snap to game developers via Snap Kit. With about half of all mobile games made on the platform, Unity Ads reports about 23 billion monthly global ad impressions.

Chart showing the share price performance of Snap Inc. (SNAP)
TradingView.com

From a technical standpoint, the stock rebounded from its reaction lows last week to retest its prior highs. The RSI is approaching overbought levels with a reading of 60.64, but the MACD remains in a bearish downtrend. These indicators suggest that the stock has more room to run, but its intermediate-term outlook remains a bit less certain.

Traders should watch for a move to retest prior highs of $54.71 over the coming sessions. A breakout from those levels could lead to a test of trendline resistance at $58.00. If the stock fails to break out, traders could see some consolidation between $58.00 and $49.00 or a move lower to the 50-day moving average at $44.69.

The Bottom Line

Snap shares rose more than 8% during Tuesday's session after Goldman Sachs raised its price target to $70.00 per share. With the RSI reading approaching overbought levels, traders could see some consolidation before the stock resumes its trend higher.

The author holds no position in the stock(s) mentioned except through passively managed index funds.