Is Snap Stock Fairly Priced?

SNAP: Snap logo

Snap’s stock (NYSE: SNAP) has gained approximately 8% YTD as compared to the 3% rise in the S&P500 index over the same period. Further, the stock lost almost 80% of its value in 2022 vs a 19% drop in the S&P500. That said, at its current price of $10, it is trading 18% below the fair value of $12 – Trefis’ estimate for Snap’s valuation

The company posted mixed results in the third quarter of 2022, with earnings beating the consensus but revenues missing the mark. It reported total revenues of $1.13 billion – up 6% y-o-y. The growth rate slowed down in 2022 due to tough macroeconomic conditions and intense competition in the space. However, daily active users (DAUs) have continued to improve – increasing by 19% y-o-y to 363 million. On the cost front, total costs & expenses increased 25% y-o-y. Further, the other income decreased in the quarter, resulting in a net loss of $359.5 million up from $71.9 million in the year-ago period. 

The top line grew 17% y-o-y to $3.3 billion in the first nine months of 2022. However, the cost & expenses increased 26% y-o-y over the same period, leading to an operating loss of $1.1 billion. Further, the other income decreased from $177 million to -$22.5 million. Overall, the net loss increased from $510 million to $1.14 billion. 

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  2. Beating S&P500 By 62% Since The Start Of 2023, How Will Snap Stock Trend After Q4 Results?
  3. Up 91% YTD, What’s Next For Snap Stock?
  4. Is Snap Stock Attractive At The Current Levels?
  5. What To Expect From Snap Stock?
  6. Snap Stock Is Fairly Valued

The consensus estimates for Q4 revenues and earnings are $1.3 billion and $0.11 respectively. Overall, we forecast Snap’s revenues to touch $4.6 billion in FY2022. Additionally, SNAP’s revenue per share (RPS) is likely to improve to $2.83, which coupled with a P/S multiple of just above 4x will lead to a valuation of $12.

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 Returns Jan 2023
MTD [1]
YTD [1]
Total [2]
 SNAP Return 8% 8% -34%
 S&P 500 Return 3% 3% 77%
 Trefis Multi-Strategy Portfolio 7% 7% 236%

[1] Month-to-date and year-to-date as of 1/12/2023
[2] Cumulative total returns since the end of 2016

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