Snap’s stock (NYSE: SNAP) has lost approximately 71% YTD as compared to the 20% drop in the S&P500 index over the same period. While the record-high inflation numbers, interest rate hikes, and geopolitical tensions over the recent months impacted the stock market negatively, SNAP stock further struggled due to a lower-than-expected earnings outlook. It plunged 43% in a single day (24th May) after the company issued a warning to investors that it won’t be able to meet its revenues and earnings guidance in Q2. That said, at its current price of $14, it is trading 65% below the fair value of $39 – Trefis’ estimate for Snap’s valuation.
SNAP is an American camera and social media company, which primarily generates revenue through advertising (including Snap Ads and Augmented Reality Ads). It posted lower than expected results in the first quarter of 2022, with both revenues and earnings missing the mark. Further, the second-quarter consensus estimates for the revenues and earnings are around $1.15 billion (up 36% y-o-y) and -$0.01 (down from 0.10) respectively. This is quite the opposite of the high-paced growth seen in 2021. Notably, social media companies, in general, are witnessing a slowdown in growth due to the tough macroeconomic outlook.
Last year, Snap’s top line jumped 64% y-o-y to $4.1 billion. Further, its two key user metrics, daily active users (DAUs) and average revenue per user (ARPU), both posted strong growth. We forecast Snap’s revenues to touch $5.5 billion in FY2022. Additionally, SNAP’s revenue per share (RPS) is likely to improve to $3.53, which coupled with a P/S multiple of 11x will lead to the valuation of $39.
|S&P 500 Return||-8%||-20%||71%|
|Trefis Multi-Strategy Portfolio||-6%||-24%||198%|
 Month-to-date and year-to-date as of 6/29/2022
 Cumulative total returns since the end of 2016
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