Should you invest in SNAP as it reportedly buys a 3D AR solutions provider?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 20, 2021
  • Snap shares traded 3.3% higher on Tuesday morning after news it is reportedly buying Vertebrae.
  • Vertebrae is a 3D and augmented reality solutions provider whose customers include Toyota and Adidas.
  • In May, Snap bought augmented reality display provider WaveOptics for $500 million. Time to buy SNAP shares?

Snap Inc. (NYSE:SNAP) shares gained 3.3% on Tuesday morning after news broke late on Monday. The social media company is buying 3D and Augmented Reality (AR) solutions provider Vertebrae. The Santa Monica, CA-based technology company also bought WaveOptics, an augmented reality display provider, to power its new Spectacles glasses for $500 million in May.

Snap is investing heavily in display and 3D technologies to drive future growth. The AR and 3D industries are some of the fastest-growing markets in the technology space. As a result, Snap could be poised for a significant rally ahead of an exciting period.

Snap valuation and outlook 

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From a valuation perspective, Snap shares trade at a relatively steep forward P/E ratio of 88.40, making it less attractive to value investors. However, analysts expect SNAP earnings per share to grow by 13.60% this year before spiking by a whopping 205% next year.

This year’s slow growth prospects explain the steep valuation, but this could improve significantly next year when earnings grow by more than 200%. Therefore, Snap could be an attractive investment for growth investors. In addition, the company’s long-term future is more compelling given the strategic acquisitions it is making in the 3D and AR space.

Source – TradingView

Technical overview: Snap stock price forecast for Q3 2021

Technically, Snap’s share price appears to have bounced back to trade above the 100-day moving average following last week’s pullback. The stock price has also avoided falling to oversold conditions of the 14-day RSI, positioning well for a rebound.

SNAP’s share price could rise significantly ahead of its fiscal second-quarter results on Thursday. Therefore, investors can target short-term rebounds at $65.25 or higher at $70.59. The support levels are $54.76 and $48.66.

Bottom line: the catalyst for buying SNAP shares now

In summary, SNAP shares are bouncing back at the right time, just two days before the company’s next earnings report. Snap’s recent investments will provide long-term growth, making the stock perfect for growth investors. And although this year’s EPS growth of just 13.60% is not impressive, next year’s growth will be exciting to investors. 

Therefore, SNAP’s recent stock price decline is an opportunity to buy before the rebound pushed the price higher.

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