Snap Inc (NYSE: SNAP) stock continued its bull run on Friday after a notorious Wall Street short seller said there are too many traders betting against Snap. The stock could be headed much higher as a result.
Citron Research editor and activist short seller Andrew Left says there is simply too much negativity surrounding Snap stock at the moment, and expectations are so low that it wouldn’t take much to send the stock soaring.
Snap’s short interest, the total number of shares held short, is more than 108.7 million. Left estimates about 21 percent of Snap’s public float, the total number of shares available to trade on the public market, is currently held by short sellers.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
Left says extreme negativity and high short interest can be a dangerous combination for short sellers and a winning recipe for bulls.
SNAP stock rose more than 3 percent on Thursday, and was up another 1 percent on Friday morning.
So far in 2018, Snap stock has been a profitable trade for short sellers. A controversial app redesign, a poorly received earnings call and some negative celebrity Twitter reviews from Kylie Jenner and other celebrities have pushed the stock’s share price lower by 45 percent year-to-date. At this point, Left says, even a lack of more bad news could be enough of a bullish catalyst for Snap stock.
“Like many who spend a lot of time on the short side, we too often have been the ‘short sighted’ short seller and have not paid close attention to the bull case and the potential for upside catalysts which, in the case of SNAP, are compelling,” Left says.
Left says that after its 2018 sell-off, Snap stock is trading at its highest enterprise value-per-sales discount in history relative to its social media peers. In addition, Wall Street darling Facebook ( FB) is currently valued at about $345 per daily active user, while Snap is valued at only $63 per daily active user.
Left says it is becoming clear that Snapchat is more than just a fad. He says Snap’s young user base will become increasingly valuable to advertisers and even makes Snap a potential buyout target for companies like Alphabet ( GOOG, GOOGL) and Apple ( AAPL).
In the meantime, Left says all Snap stock needs is a spark.
[See: 10 Great Tech ETFs That Stay Under the Radar.]
“It is one stabilizing quarter from giving investors a 30% or more return — more than you can see in any FANG stock, in our opinion,” he says.
Citron has a $17 price target for SNAP stock.
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Short Seller Goes Long on Snap Inc Stock originally appeared on usnews.com
