On Oct. 20, Snap stock surged more than 24 percent following the company's third-quarter earnings release after the market closed. Snap's quarterly sales and earnings beat analysts’ average estimates.
When did Snap report earnings?
Snap reported its third-quarter 2020 financial results yesterday after the market closed. The social media company held its earnings conference call at 5:00 p.m. ET. Investors and media can access the audio webcast along with supplemental information on the company’s investor relations website.
Snap’s earnings report highlights
In the third quarter, Snap reported adjusted EPS of $0.01, compared with -$0.04 in the third quarter of 2019. The adjusted EPS beat analysts’ average estimate of -$0.05. Snap generated sales of $678.7 million in the third quarter, which was 52.1 percent higher than in the third quarter of 2019. The company also beat analysts’ average sales estimate of $555.9 million.
In the third quarter, Snap surprised everyone by adding 11 million global DAUs, which took its tally to 249 million—up 18 percent year-over-year. Analysts expected close to 5 million global DAU additions during the quarter. Snap reported average revenue per user of $2.73 for the third quarter. In the third quarter of 2019, Snap reported global DAUs of 210 million and average revenue per user of $2.12.
In the fourth quarter, Snap expects to reach about 257 million global DAUs. The company also expects year-over-year sales growth of 47 percent to 50 percent for the fourth quarter.
Snap's stock price is rising after the company's Q3 earnings release
Snap stock was up about 24 percent at $35.28 in after-hours trading on Oct. 20 as of 7:59 p.m. ET. The stock fell 0.7 percent on Oct. 20 and closed at $28.45 with a market capitalization of $41.8 billion.
Snap stock has risen by 5.4 percent in the last five days and 103.2 percent in the last year. The stock is trading 2.2 percent below its 52-week high of $29.08 and 260.6 percent above its 52-week low of $7.89. Snap doesn’t currently pay a dividend.
What is Snap’s stock forecast?
According to data compiled by TipRanks, 21 of the 26 analysts covering Snap have a "buy" or equivalent rating on Snap. Four analysts have a "hold" rating, while one has a "sell" rating for Snap. Currently, analysts' average stock price forecast for Snap is $30.46, which suggests a 7.1 percent upside. Their highest target price of $40 indicates a 40.6 percent upside, while their lowest target price of $19 indicates a 33.2 percent downside.
I believe Snap stock has a huge upside potential based on the company's strong growth outlook. The social media company has managed to grow its customer base despite competition from Facebook and Pinterest. Snap is benefiting amid the coronavirus pandemic as more people look for entertainment online. Additionally, Snap has introduced new features as it tries to differentiate its product offerings and compete with TikTok and Instagram.