3 Reasons Why Snap Stock Might Stay Above $17

Shares ofSnap, Inc. (NYSE: SNAP)continued their sell-off yesterday. The stock slipped another 4%, and that was after a 19% drop last week. One of this year's most anticipated -- and initially scorching-hot -- IPOs is cooling off. It has now given up nearly 60% of its first week's gains, and it may seem as if it's just a matter of time before we start talking about Snap as a busted IPO.

It doesn't have to go that way. There may be no shortage of Snap naysayers just waiting for the chance to belt out "I told you so," but it also wouldn't be a surprise to see the stock bounce off those levels if it should continue to plummet into the teens in the coming days. Let's look at a few of the reasons why the stock may show some signs of life as we get closer to its IPO price of $17.

Image source: Snap.

1. Underwriters will chime in after Wall Street chimes in

Some of the biggest Wall Street firms in the country were underwriters in this month's Snap, Inc. IPO. More than two dozen firms got in on the offering, handing over the shares to their biggest and best clients.

Underwriters involved with the offering can't speak up to sing the investment's praises just yet. They are barred by the SEC from releasing research for 25 days following the IPO. We're now more than halfway there.

All of the reports won't be glowing testimonials, but you can be sure that they will all set price targets of $17 or higher. They handed over shares to IPO buyers at $17 less than two weeks ago. Do you really think they would call themselves out?

If the stock keeps drifting to its IPO price, it should bounce back under a deluge of analysts initiating coverage with price targets north and possibly well north of $17.

2. Folks are making Spectacles of themselves

Snap bills itself as a "camera company" and not a dot-com darling. Digital images -- photos and short clips -- are its lifeblood, and it made a push into hardware late last year with the rollout of Spectacles. The $130 specs with built-in cameras shoot 10-second videos that can be wirelessly uploaded to Snapchat when paired up with the mobile app.

They were hot out of the gate, and the decision to sell them through a select number of vending machine "bots" made them hot commodities. Snap has widened its distribution. It just opened a pop-up shop in Venice, Calif. -- weeks after the pop-up shop in New York City completed its run. It also recently began selling them online.

Snapchat has a huge audience with 158 million daily active users. Spectacles are reasonably priced for what they do. Work the math. This could be a big product, and a real revenue driver for a company that generated just $404.5 million on the top line last year.

3. The IPO increases awareness

Consumer-facing companies often experience a near-term spike in brand awareness following their IPO. One may think that Snapchat's parent company is already fairly well known, but that's not really the case outside of its core millennials.

With Snap and Snapchat all over the news this month, it wouldn't be a surprise to see a sequential uptick in users. The increase should be heartier than the mere 3% sequential advance between the third and fourth quarters, a slowdown that lit a fire in some bearish perspectives.

Snap should report financial results in late April or early May. If the stock is still languishing by then, strong usage metrics can turn market sentiment around.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.