Snap’s Stock Likely To Trade Higher Post Q3 Earnings?

by Trefis Team
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Snap’s stock (NYSE: SNAP) is scheduled to report its fiscal Q3 2021 results on Thursday, October 21. We expect Snap to beat the consensus estimates for revenues, while its earnings will likely be in line with the consensus. The company has beaten consensus estimates for revenue and earnings for each of the last four quarters. In the past year the company has increased engagement as daily average users continue to increase every quarter. In Q2 2021, the company launched 177 million new international Discover Channels, including 36 in the UK and 24 in India, one of which is a partnership with Sony Pictures Network to launch five shows. For Q2 2021, Spotlight, the company’s newest platform surfacing the most entertaining Snaps from the community, saw daily active users grow by 49%, average daily content submissions tripled, and daily time spent per user in the U.S. grow by over 60% compared to the previous quarter. We expect the same to drive the third-quarter FY2021 results as well..

Our forecast indicates that Snap’s valuation is $81 per share, which is about 8% higher than the current market price of around $75. Our interactive dashboard analysis on Snap’s pre-earnings has more details. 

(1) Revenues expected to be marginally ahead of the consensus estimates

Snap’s revenues for full-year 2020 were $2.5 billion – up 46% y-o-y, mainly due to growth in North America Advertising revenues as the digital form of advertising continues to garner higher demand. Trefis estimates Snap’s fiscal Q3 2021 revenues to be around $1.14 billion, just above the $1.1 billion consensus estimate. We expect the North America segment to continue to drive results. Our dashboard on Snap’s revenues offers more details on the company’s operating segments along with our forecast for the next 2 years.

2) EPS is likely to be in line the consensus estimates

Snap Q3 2021 earnings per share (EPS) is expected to be $0.08 per Trefis analysis, in line with the consensus estimate of $0.08. The company’s net loss decreased from $325.9 million to $151.6 million in the first quarter of 2021 as they continue to work on improvement in their operating margin. We expect the net income margin to improve in FY2021 compared to the previous year.

(3) Stock price estimate 8% more than current market price

We arrive at Snap’s valuation, using an RPS estimate of around $3.57 and a P/S multiple of 22.8x in fiscal 2022. This translates into a price of $81, which is 8% above the current market price of around $75.

While Snap’s stock could trade slightly higher after the company reports earnings, our analysis of Snap vs. Twitter also finds Snap to be a better investment option. Also, Snap Peer Comparison summarizes how the company fares against peers on metrics that matter.

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