Snap’s Stock Rally To Continue?

Snap (NYSE: SNAP) stock is scheduled to report its fiscal Q2 2021 results on Thursday, July 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 and 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. In March 2021, over 125 million Snapchatters used Spotlight, the company’s newest platform surfacing the most entertaining Snaps from the community. They have now launched Spotlight in a total of 14 countries including three new countries — India, Mexico, and Brazil. We expect the same to drive the second-quarter FY2021 results as well.

Our forecast indicates that Snap’s valuation is around $77 per share, which is 30% above the current market price near $59. Look at our interactive dashboard analysis on Snap’s pre-earnings: What To Expect in Q2? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q2

Trefis estimates SNAP’s fiscal Q2 2021 revenues to be around $900 million, 6.5% above the $845 million consensus estimate. Snap’s revenue continued to increase as the shift toward online platforms for marketing and advertisement continued.  We expect the momentum generated over the last few quarters to continue in the second quarter of FY2021. Overall, we expect revenue of around $4 billion in FY2021. Our dashboard on Snap’s revenues offers more details on the company’s segments.

(2) EPS likely to beat consensus estimates

Snap’s Q1 2021 earnings per share (EPS) is expected to be $-0.02 per Trefis analysis, above the consensus estimate of $-0.06. The company’s net income margin improved in 2020. Altogether, the company is likely to improve its EPS in 2021 to $-0.57 compared to $-0.65 in the previous year.

(3) Stock price estimate 30% above the current market price

Going by our Snap’s valuation, with a Revenue per Share (RPS) estimate of around $2.66 and a P/S multiple of 29x in fiscal 2021, this translates into a price of $77, which is 30% above the current market price of around $59.

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

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