Wall Street May Not Be As Bullish On Snapchat As It Seems

Snap Inc SNAP shares rose 4.5 percent on Monday after a flood of Wall Street analyst published bullish research notes on the company.

While Snap investors are enjoying fresh bullish commentary from firms such as Citigroup, Deutsche Bank, Credit Suisse, Goldman Sachs, Jefferies, Morgan Stanley, Cowen and RBC Capital Markets, other traders are skeptical of the firms’ motivation.

Each of the eight banks who came out bullish on Snap on Monday were also underwriters for the company’s massive IPO. IPO underwriters are restricted from commenting on a stock until 25 days since its IPO date, which is why the huge wave of commentary all came out on Monday.

The stock closed at $23.83.

Related Link: Credit Suisse: Snap Stock Is A Risk Worth Taking

IPO underwriters are responsible for selling large lots of IPO shares to high-profile clients and investors. In that sense, it’s good for these banks’ business if the IPO clients are happy. After initially surging above $28 in public trading, Snap stock sold off hard in the weeks following its IPO. When the stock dipped below $19 on March 17, it was trending dangerously close to its $17 IPO price.

"Snap looks well positioned for growth as advertisers clamor to serve ads to its large audience of deeply-engaged users, many of whom are in the attractive millennial demographic and are located in high-value ad markets," Jefferies analyst Brian Fitzgerald wrote in his Buy initiation note.

Other analysts representing the IPO underwriters shared a similar take on the stock.

"Investing in SNAP shares, in our view, is high-risk/high-reward given the presence of a long list of well-heeled global competitors, and the potential for the migration and/or the failure to hang on to its existing user base or scale advertising revenue through ongoing product development," Credit Suisse analyst Stephen Ju wrote.

Cynical investors were likely not surprised with the fact that a large number of Snap underwriters came out with bullish calls on the stock on Monday. Those cynics will likely be looking for possible downgrades from these same banks one the IPO lockup periods expire in August 2017 and March 2018.

The Finviz chart below highlights all the major Snap analyst initiations and applicable price targets up to this point: