Snap Stock To Deliver Mixed Results?

by Trefis Team
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Snap (NYSE: SNAP) stock is scheduled to report its fiscal Q1 2021 results on Thursday, April 22. Snap’s flagship product, Snapchat, is a camera application that helps people communicate visually with friends and family through short videos and images called Snaps. The company’s products are Camera, Friends Page, Discover, Snap Map, Memories, and Spectacles. We expect SNAP to beat the consensus estimates for revenues but miss consensus earnings. The company has reported better than expected revenues and earnings figures in each of the last four quarters. In the past year the company has increased engagement as daily average users increased across quarters. The company continued to invest in its ‘Discover’ platform as over 90% of the U.S. Gen Z population watched shows and publisher content in Q4 2020. We expect the same to drive the first-quarter FY2021 results as well.

Our forecast indicates that Snap’s valuation is around $64 per share, which is 4.4% above the current market price of around $61. Look at our interactive dashboard analysis on Snap’s pre-earnings: What To Expect in Q1? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q1

Trefis estimates SNAP’s fiscal Q1 2021 revenues to be around $833 million, 12% above the $740 million consensus estimate. Snap’s revenues of $2.5 billion for the full year 2020 were much above its 2019 figure, as people turned toward social media platforms when lockdown restrictions were prevalent across the world. Organizations also started to move toward digitization (including digital advertising) which contributed to revenue growth. We expect the momentum generated over last couple of quarters to continue in the first quarter of FY2021. Overall, we expect revenue of around $3.7 billion in FY2021. Our dashboard on Snap’s revenues offers more details on the company’s segments.

(2) EPS likely to miss consensus estimates

Snap’s Q1 2021 earnings per share (EPS) is expected to be $-0.13 per Trefis analysis, below the consensus estimate of $-0.06. The company’s net income margin improved in 2020. This improved the EPS figure from $-0.75 to $-0.65. The removal of lockdowns and steady growth in the rate of vaccinations has contributed to a revival in demand across sectors. Altogether, the company is likely to improve its EPS in 2021 to $-0.54 compared to $-0.65 in the previous year.

(3) Stock price estimate 4.4% above the current market price

Going by our Snap’s valuation, with a Revenue per Share (RPS) estimate of around $2.53 and a P/S multiple of just above 25.2x in fiscal 2021, this translates into a price of $64, which is 4.4% above the current market price of around $61.

Note: P/S Multiples are based on Share Price at the end of the year and reported (or expected) revenues for the full year

Looking for reasonably valued software stocks with big room to grow? Check out our theme on Mid-Cap SaaS Stocks.

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