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Should You Buy SNAP Stock Before Its Q2 Earnings?

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Yesterday, Snap stock rose 3.0 percent and closed at $25.27. The stock was trading 5.6 percent below its 52-week high of $26.76 and 220.3 percent above its 52-week low of $7.89. At the closing price yesterday, Snap stock had a market capitalization of $36.8 billion.

Snap’s Q2 earnings expectations

Snap is set to report its second-quarter earnings after the market closes today. Should you buy the stock ahead of its earnings results? 

Analysts expect Snap to post revenue of $439.06 million in the second quarter—a growth of 13.2 percent YoY (year-over-year) from $388.02 million. Also, they expect the social media company to post an adjusted EPS of -$0.09, down from -$0.06 in the second quarter of 2019.

Analysts’ recommendations for Snap stock

Among the 39 analysts tracking Snap stock, 25 recommend a buy—down from 26 last month. Twelve analysts recommend a hold—down from 13 last month. Two analysts recommend a sell—unchanged from last month. Analysts have an average target price of $22.60 on Snap. The target price implies a 10.6 percent fall based on the stock’s closing price of $25.27 on Monday. The consensus target for the stock has risen since June by 18.2 percent from $19.12.

Today, Evercore ISI and Deutsche Bank raised their target prices for Snap stock from $18 to $23 and $24 to $28, respectively.

On Monday, Youssef Squali of SunTrust increased his target price on Snap stock from $15 to $24 and gave the stock a hold rating. Squali believes the company will likely report strong numbers in the second quarter due to increased user engagement. According The Fly, “The analyst believes the results will be better than the mid-point of the wide-ranging consensus estimates, and believes engagement remained ‘robust’ during the quarter. While Squali thinks pricing is off the lows of March/April, he believes it is still relatively soft as ad demand has not yet caught up with rapidly growing inventory levels.”

Goldman Sachs analyst Heath Terry also increased his target price for Snap stock to $29 from $25 and maintained his buy rating.

Peer comparison

Facebook is set to report its second-quarter earnings results on July 29. In the quarter, analysts expect the company’s sales to rise 2.8 percent YoY to $17.4 billion from $16.9 billion. They also expect Facebook to post an adjusted EPS of $1.38 during the quarter compared with $1.99 in the same quarter last year.

Pinterest plans to report its second-quarter earnings results on July 31. For the second quarter, analysts expect Pinterest to report revenue of $248.7 million—a 4.8 percent reduction YoY from $261.3 million. Also, they expect the company to post adjusted EPS of -$0.14 compared with -$0.06 in the same quarter last year.

As of yesterday, Facebook and Pinterest had average broker target prices of $252.54 and $23.55, respectively. These figures imply 2.9 percent and -9.7 percent returns, respectively, over the next 12 months.

Snap’s stock returns

Based on its closing price yesterday, Snap stock was trading 4.4 percent above its 20-day moving average of $24.20, 19.4 percent above its 50-day moving average of $21.16, and 46.9 percent above its 100-day moving average of $17.20. Snap’s 14-day relative strength index score is 62. The score suggests the stock is approaching overbought levels. Snap’s lower, middle, and upper Bollinger Bands are $22.29, $24.20, and $26.11, respectively. On Monday, the stock closed near its upper Bollinger Band, which suggests that it is overbought.

On Monday, the Dow Jones Industrial Average rose by 8.92 points or 0.03 percent. The S&P 500 and Nasdaq Composite rose 0.84 percent and 2.51 percent, respectively. 

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