Snapchat parent Snap, a social media company, has seen several analyst upgrades and target price increases recently. The change in analysts' opinion might simply be a result of them catching up to Snap’s stock price. Is it a good investment? What can investors expect from Snap stock in 2021?
Snap stock has had a good run over the past year. At $62.01, Snap stock has risen 376 percent over the last year. Snap has outpaced the S&P 500, which is up 48.3 percent. Snap is ahead of many of its competitors. Over the last year, Twitter and Facebook stocks have gained 165 percent and 74 percent, respectively. Pinterest has gained 395 percent.
Snap’s Q1 earnings
Snap plans to report its earnings for the first quarter of 2021 after the markets close on April 22. In the first quarter, Wall Street analysts expect the social media company to post sales of $742.16 million, which would be 60.5 percent higher than $462.48 million in sales in the first quarter of 2020. Analysts also expect Snap to post an adjusted EPS of -$0.05 in the first quarter compared to -$0.08 in the same quarter a year ago.
Meanwhile, Snap expects to generate sales between $720 million and $740 million in the quarter and an adjusted EBITDA between -$70 million and -$50 million.
Snap doesn’t pay dividends.
Snap stock doesn’t pay dividends right now.
Snap’s stock price forecast
According to estimates compiled by Market Beat, analysts' consensus target price is $67 for Snap stock, which is 8 percent above its current price. Among the 37 analysts tracking Snap, 30 recommend a buy, six recommend a hold, and one recommends a sell. The highest target price of $100 is 61.3 percent above the stock's current price, while the lowest target price of $24 is 61.2 percent below the stock's current price.
On April 13, Wedbush upgraded Snap to outperform from neutral, and also raised its target price to $75 from $52. The analyst thinks that Snap is well-positioned as a video-centric platform that's centered around a younger, digitally native audience. Atlantic Equities upgraded Snap to overweight from neutral with a target price of $75. On April 15, Cowen also boosted Snap's target price to $88 from $86 and kept an outperform rating.
Snap's NTM EV-to-sales multiple is 24.3x. In comparison, Twitter, Pinterest, and Facebook have NTM EV-to-sales multiples of 11.0x, 20.2x, and 7.5x, respectively. From a valuation perspective, Snap stock looks expensive compared to the other social media companies.
Snap is a good investment.
SNAP stock looks like a good investment based on its robust growth outlook. In the fourth quarter of 2020, the global DAUs (daily active users) increased by 22 percent YoY to 265 million due to increased user engagement amid the COVID-19 pandemic. More impressively, Snap’s ARPU (average revenue per user) increased 33 percent to $3.44 in the fourth quarter. Snap’s customer base is rising despite intense competition from Facebook, Pinterest, and Twitter.
Snap is developing all of the resources necessary to achieve profitability. The company’s growth is expected to accelerate in the same way in 2021 and beyond. Snap's download ranking for iPhone users in the U.S. has risen from an average ranking of 12 in January to six in April, according to Investor Place. As a result, in future Snap earnings reports, both DAUs and ARPU would continue growing to turn free cash flow positive.