Snap pops 9 percent after winning second 'buy' recommendation
By Noel Randewich and Saqib Iqbal Ahmed
SAN FRANCISCO (Reuters) - Shares of Snap Inc (SNAP.N: Quote) jumped 9 percent on Wednesday after the owner of messaging app Snapchat received a second analyst "buy" rating following a red-hot public listing this month and with Wall Street skeptical about its lofty valuation.
The listing on March 1 was the largest by a technology firm in three years, but trading has been volatile, with many investors critical of lack of profitability and decelerating user growth.
Snap's stock was up 7.1 percent at $21.84 early Wednesday afternoon and traders bought call options contracts at the fastest pace since they first became available on March 10, according to options analytics firm Trade Alert.
A call conveys the right to purchase shares at a fixed price and is usually used to bet on share price gains.
In the newest vote of confidence for Snap, Drexel Hamilton analyst Brian White on Tuesday launched coverage with a "buy" rating and a $30 target price.
"We view Snap as a platform for the imagination that unlocks the creativity of its users and allows uninhibited expression with friends. Snap is a fun place to spend time which can be monetized," White wrote in a note to clients.
The Los Angeles-based company's app, which allows users to share short-lived messages and pictures, is popular with young people but faces intense competition from larger rivals such as Facebook Inc's (FB.O: Quote) Instagram. Snap has warned it may never become profitable.
Based on the analysts' average buy, sell and neutral recommendations, Snap has the second-worst rating among 282 U.S. companies that have a market capitalization of at least $20 billion, according to Thomson Reuters data. The worst-rated is Sprint Corp (S.N: Quote). Continued...