Snap's stock has been 'very weak.' Here's what analysts think ahead of earnings.

SnapSnap CEO Evan Spiegel
  • Snap, Snapchat’s parent company, is set to report after Tuesday’s closing bell.
  • Shares were trading slightly lower ahead of the report.
  • Even though Snap has bounced strongly from its all-time low last December, it’s still trading about 70% below its initial public offering price of $US17 a share.
  • Ahead of the report, analysts weighed in on what to expect following the company’s most recent executive departure.
  • Watch Snap trade live.

Snap, the parent company of messaging app Snapchat, is scheduled to report fourth-quarter and full-year earnings after Tuesday’s closing bell.

Wall Street analysts were cautious ahead of results – which Snap said in a pre-announcement would prove “slightly favourable to the top end” of its prior guidance. The report will be the last for departing CFO Tim Stone. The sudden announcement sent the stock tumbling and left analysts concerned about management’s execution.

Snap shares were slightly lower Tuesday, with some experts who track the name from a technical standpoint saying the stock has traded in anything but a resilient fashion.

“It’s been a very weak stock that has bounced over 45% off its lows and is now back to its declining 100-dma,” Robert Sluymer, technical strategist and managing director at Fundstrat Global Advisors, told Business Insider in an email on Tuesday. A declining 100-day moving average is traditionally a negative indicator.

Even though Snap has bounced sharply off its December 2018 record low of $US4.82 per share (currently $US6.91), the stock is still trading nearly 70% below its initial public offering price of $US17.

Meanwhile, even relatively bullish analysts point out that key risks loom over the stock at this point. Mark Mahaney, an analyst at RBC Capital Markets who downgraded shares in the wake of Snap’s announcement of Stone’s departure last month, said there’s potential for “further deceleration” in the app’s user growth. He carries an $US8 price target, implying a 15% rise from current levels.

He added: “A KEY will be whether SNAP guides to DAU stabilisation. An unknown.”

Snap shares have consistently reacted to earnings reports with wide swings. This quarter is no different, with an implied move of 15% in either direction, according to an analysis from derivatives strategists at Susquehanna. On average, the stock has seen a 19.5% realised move over the company’s seven reports.

With Snap trading at a relatively inexpensive valuation of 5.3 times enterprise value/revenue – one way to assess a security’s valuation – the stock appears fairly valued, SunTrust analysts told clients in a Monday note. Still, the analysts recommend investors hold the stock, rather than buy it up, due in part to decelerating revenue and “high leadership turnover.”


Read more:
Here are 20 senior executives who have abandoned Snap since its IPO less than 2 years ago

Wall Street analysts surveyed by Bloomberg expect Snap to report an adjusted loss of $US0.08 a share on revenue of $US377.48 million. Twenty-four analysts surveyed by Bloomberg carry “hold” ratings, 10 say “sell,” and four say “buy.”

Last quarter, the company reported both profits and sales that topped analysts’ forecasts, with an adjusted loss of $US0.12 a share on revenue of $US297.7 million.

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