Why Is Snap Stock Rising before Its Q4 Earnings?



Snap (NYSE:SNAP) stock rose in the pre-market trading session today. The stock gained 2.25% as of 9:19 AM ET. However, Snap stock fell by 0.82% on Monday and closed at $18.23. At this closing price, Snap’s market capitalization was about $25.5 billion. The stock has gained over 11% year-to-date.

Snap stock is riding high ahead of its fourth-quarter earnings results. The company will release its earnings results after the closing bell today.

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Snap’s Q4 expectations

The social media company expects its revenue to rise to $540 million–$560 million in the fourth quarter of 2019. The average revenue expectation of $550 million is more than 41% higher than its revenue in the fourth quarter of 2018.

Wall Street analysts expect Snap to post sales of $563 million in the fourth quarter. The figure would mark a rise of 44.4% YoY (year-over-year) compared to $390 million in the fourth quarter of 2018. Analysts also expect the company to report an adjusted EPS of $0.01 in the fourth quarter compared to -$0.04 in the fourth quarter of 2018.

Snap’s adjusted EPS could improve to -$0.19 in 2019 compared to -$0.47 in 2018. The company’s adjusted EPS could improve significantly to $0.03 in 2020. For 2019, Snap’s revenue growth will likely be 45.6% YoY—up from 43.1% in 2018. Wall Street analysts expect the company’s revenue growth to fall to 37.5% YoY in 2020.

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Analysts’ recommendations

About 42 analysts cover Snap stock as of today. Among the analysts, 21 recommend a “buy,” 19 recommend a “hold,” and two recommend a “sell.” According to analysts’ consensus, Snap stock has a mean target price of $19.44 and a current market price of $18.23, which suggests upside potential of 6.6% in the next 12 months. The median target price is $20.00 today.

On Monday, Credit Suisse analyst Stephen Ju increased its target price on Snap stock to $25 from $22. Ju kept the “outperform” rating on the stock. According to TheFly, “The analyst cites faster longer term average revenue per user growth expectations for the target bump. While the company has not given specific disclosure on user time spent or sessions per day, the analyst calculates that the number of Snap ads a user sees per session remains at a very low level.” The report also said, “This suggests that there remains “significant room” for the company to increase the ad load in pursuit of revenue growth.”

On Monday, Deutsche Bank increased its target price on Snap stock to $20 from $16. Last week, Citigroup and Stifel raised their target prices for the stock from $18 to $20 and $19 to $22, respectively. Guggenheim also raised its target price for the stock from $22 to $23.

Technical level

Based on the closing price on Monday, Snap stock was trading 0.2% below its 20-day moving average of $18.27. The stock is also trading 10.6% above its 50-day moving average of $16.48 and 16.0% above its 100-day moving average of $15.71.

Snap’s 14-day relative strength index score is 56. The score suggests that the stock isn’t overbought or oversold. The stock’s upper, middle, and lower Bollinger Band levels are $19.90, $18.27, and $16.64, respectively. On Monday, the stock closed near its middle Bollinger Band level, which also suggests that it isn’t overbought or oversold.

Read Snap Stock Rose after Two Analysts Turned Bullish to learn more.


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