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Snap shares surged Wednesday, outpacing gains in the broader tech sector, a day ahead of the company’s second-quarter earnings report.
The stock shot up 8.7% in midday trading, while the Nasdaq Composite
COMP,
gained 1.6% and the S&P 500
SPX,
was up 0.7%. Snap is scheduled to report second-quarter results after Thursday’s closing bell.
Snap Inc.
SNAP,
shares are down 67.5% this year, compared to Nasdaq Composite’s 24% fall and the S&P 500’s decline of 16.9% over the same period. On May 23 Snap said it will likely miss quarterly estimates, citing an economy that has “deteriorated further and faster than anticipated.” The news sent shares of Snap and other tech companies dependent on advertising, such as Alphabet Inc.
GOOGL,
and Meta Platforms Inc.
META,
tumbling.
All eyes are now on Snap’s second-quarter results. The FactSet consensus calls for a loss of 20 cents a share, wider than the loss of 10 cents a share in the same period a year ago, with sales rising to $1.14 billion from $982.1 million.
See Now: Snap stock falls 30% after Snapchat parent says it will miss estimates due to deteriorating economy
In a note Tuesday, MKM Partners analyst Rohit Kulkarni discussed the possibility of a relief rally following Snap’s results. “The Street’s 3Q model reset feels reasonable, and we expect SNAP to provide a conservative outlook, likely bracketing Street [revenue] and Ebitda [earnings before interest, taxes, depreciation and amortization] at the high-end ($1.2bn/$75mn),” he wrote. “Such an outcome could spark a relief rally, in our view, as SNAP shares are trading very close to all-time lows.”
Despite the possibility of market uncertainty lingering through year-end, Snap remains a “resilient asset,” according to Kulkarni. “We are constructive on Snap shares as we think about 2023 given product/innovation/user growth track record, and continue to see ARPU growth opportunity along with a sharp recovery in the Online Ad market, following a consumer recession,” he wrote.
MKM Partners has a buy rating and a $26 price target for Snap.
Earlier this week Credit Suisse lowered its Snap target to $45 from $59 amid concern about rotating advertising budgets and economic headwinds.
See Now: Snap stock price target cut by Credit Suisse as advertising budgets rotate
Credit Suisse’s price target cut echoes concerns from analysts about the impact of a slowing economy on digital advertising.
Snap, which describes itself as a camera company, had 332 million daily active users as of the quarter ending March 31, 2022, an increase of 18% on the prior year’s quarter.
Of 41 analysts surveyed by FactSet, 30 have an overweight or buy rating, 10 have a hold rating and one has a sell rating. The current average stock price target of $23.64 is down sharply from $54.59 at the end of March.
