Is Snap Stock a ‘Sell’ before Its Q1 Earnings?

Snap (NYSE:SNAP) stock has fallen in the pre-market trading session today. The stock has lost 1.9% as of 6:53 AM ET. Snap stock also fell 0.3% on April 17 and closed at $12.98. The stock was trading 34.3% below its 52-week high of $19.76. Meanwhile, the stock was trading 64.5% above its 52-week low of $7.89. At the closing price on April 17, the stock had a market capitalization of $18.4 billion.

Snap stock has lost 4.6% in the last week. Meanwhile, the S&P 500 Index has increased by 3.0%. Pinterest (NYSE:PINS) and Facebook (NASDAQ:FB) have gained 6.0% and 2.6%, respectively.

Snap stock continues to fall before its earnings results for the first quarter of 2020. The company will likely report its financial results after the markets close on Tuesday.

Snap’s Q1 expectations

The company expects its sales to rise to $450 million–$470 million in the first quarter. Snap’s average revenue expectation of $460 million is about 44% higher than its revenue in the first quarter of 2019.

Wall Street analysts expect Snap to report revenues of $430.9 million in the first quarter. The figure would mark a rise of 34.5% YoY (year-over-year) compared to $320 million in the first quarter of 2019. Analysts also expect the company to report an adjusted EPS of -$0.07 in the first quarter compared to -$0.10 in the first quarter of 2019.

The company’s adjusted EPS could improve to -$0.07 in 2020 compared to -$0.16 in 2019. Snap’s adjusted EPS could improve to $0.17 in 2021. For 2020, the company’s revenue growth will likely be 20.4% YoY—down from 45.3% in 2019. Analysts expect Snap’s revenue growth to rise to 36.8% YoY in 2021.

Analysts’ recommendations

About 42 analysts track Snap stock as of April 17. Among the analysts, 25 recommend a “buy,” 16 recommend a “hold,” and one recommends a “sell.” According to analysts’ consensus, the stock has a mean target price of $16.36 and a current market price of $12.98, which suggests an upside potential of 26.0% in the next 12 months. The target price has fallen from $19.03 in March.

On Monday, Credit Suisse analyst Stephen Ju decreased its target price on Snap stock to $20 from $25. Ju maintained the “outperform” rating on the stock before its 2020 earnings results. According to a report from TheFly, “The analyst is taking a more conservative stance regarding Snap’s advertising revenue growth expectations for Q2 through Q1 of 2021.”

Last week, Guggenheim and Pivotal Research lowered their target prices for Snap stock from $23 to $18 and $24.25 to $20, respectively. MKM Partners also reduced its target price for Snap from $19 to $17.

As of April 17, Facebook and Pinterest have average broker target prices of $221.68 and $22.55, respectively. These figures imply returns of 23.7% and 29.2%, respectively, over the next 12 months.

Peer comparison

Facebook will likely report its first-quarter earnings results on April 29. Analysts expect the company to report sales of $17.6 billion in the first quarter of 2020—a rise of 17.0% from $15.1 billion in the same quarter the previous year. Analysts also expect the company to report an adjusted EPS of $1.77 during the quarter compared to $1.89 in the same quarter in 2019.

For the first quarter, analysts expect Pinterest to report revenue of $267.0 million—32.2% growth from $201.9 million in the first quarter of 2019. Analysts also expect that Pinterest will report an adjusted EPS of -$0.09 during the quarter compared to -$0.32 in the same quarter in 2019.

Snap’s stock returns

Based on the closing price on April 17, Snap stock was trading 7.1% above its 20-day moving average of $12.12. The stock is also trading 3.0% below its 50-day moving average of $13.38 and 13.4% below its 100-day moving average of $14.98.

Snap’s 14-day relative strength index score is 53. The score indicates that the stock isn’t oversold or overbought. Snap’s upper, middle, and lower Bollinger Band levels are $14.27, $12.12, and $9.97, respectively. On April 17, the stock closed near its middle Bollinger Band level, which shows that it isn’t overbought or oversold.

Read Should Investors Buy Snap Stock amid COVID-19? to learn more.