Tech stocks have led the stock market higher for more than a decade. However, some investors are growing concerned that President Joe Biden and a Democrat-controlled Congress could be bad news for big tech companies. Democrats have historically pushed for more corporate regulation to protect consumers, which puts big tech companies in the crosshairs of any antitrust or data abuse crackdowns.
Regardless of regulatory concerns, there are plenty of great investing opportunities within the technology space in 2021, if you know where to look. Today’s trade alert features a tech firm with major potential for upside in the near and mid term.
Social media platform Snap Inc. (SNAP) significantly outperformed competitors Facebook (FB) and Twitter (TWTR) in the past year, gaining about 180%. However, Snap has one of the top average revenue per user, or ARPU, and margin expansion investments in the internet stock group. Analysts are bullish on Snap’s unique, younger demographic, which is attractive to advertisers. In addition, the platform’s high engagement and long-term ARPU expansion opportunity are compelling. B of A analyst Nat Schindler is projecting revenue growth will accelerate from 42.5% in 2020 to 48.1% in 2021.
SNAP will be looking to display strength as it nears its next earnings release, which is expected to be February 4, 2021. The company is expected to report EPS of $0.07, up 133.33% from the prior-year quarter.
Investors might also notice recent changes to analyst estimates for SNAP. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook.
Digging into valuation, SNAP currently has a Forward P/E ratio of 250.33. Its industry sports an average Forward P/E of 87.77, so we might conclude that SNAP is trading at a premium comparatively. However, many analysts believe there’s plenty more upside for SNAP. Of 28 analysts offering recommendations for SNAP, 20 rate the stock a Strong Buy, 1 rates it a Buy, there are 6 Hold ratings and 1 Sell rating.
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