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SNAP Down 35% Year to Date: How Should Investors Play the Stock?
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Snap (SNAP - Free Report) shares have declined 35.3% year to date (YTD), underperforming the broader Zacks Computer and Technology sector’s appreciation of 24.9%.
Shares of Vertex, Reddit, and BOX have returned 28%, 48.3%, and 53.4%, respectively, over the same time frame. The industry has appreciated 25% YTD.
SNAP shares’ underperformance can be attributed to stiff competition from Meta Platforms, lower brand advertising revenues due to decreased demand in specific consumer discretionary verticals and its popularity with only the younger demography.
Will Expanding Product Offering Aid SNAP’s Prospects?
SNAP is expanding its product offering to drive Daily Active Users, which increased by a mere 2.3% to 432 million in the second quarter of 2024.
SNAP expects DAU to be 441 million in the third quarter of fiscal 2024.
The recently launched AI Lens that allows users to use it as a personal creative director by adding captions and Lenses to Memories is a noteworthy development.
SNAP recently introduced Map Reactions, Editable Chats, and My AI Reminders to enhance user engagement and connectivity.
In the second quarter of 2024, SNAP launched Snap Nation, a development in its collaboration with Live Nation to give users access to tours, behind-the-scenes, and festival experiences.
However, SNAP is suffering from weak demand in specific consumer discretionary segments like retail, technology as well as entertainment. The company’s brand-oriented revenues declined 1% year over year to $1.13 billion in the second quarter of 2024. The trend is expected to continue in the near term, thereby hurting top-line growth.
AI Integration to Strengthen SNAP’s Prospects
SNAP is introducing modifications in its application performances by improving battery management, screen loading latency, and visual quality. It has leveraged generative AI to enhance user experience.
SNAP is integrating AI and ML to enable personalization and content ranking to drive content engagement. In the second quarter of 2024, time spent on watching content increased 10% quarter over quarter. SNAP’s GenAI Lens in collaboration with Beyonce saw an engagement of 80 million within three days.
SNAP’s Earnings Estimates Show Solid Y/Y Growth Prospect
For the third quarter of 2024, SNAP expects revenues in the range of $1.335 to $1.375 billion, indicating 12% to 16% year-over-year growth.
SNAP expects adjusted EBITDA between $70 million and $100 million.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $1.35 billion, indicating year-over-year growth of 13.98%. The consensus mark for third-quarter 2024 earnings is currently pegged at 5 cents, unchanged over the past 30 days, and indicating year-over-year growth of 150%.
For 2024, the Zacks Consensus Estimate for earnings is pegged at 21 cents per share, indicating year-over-year growth of 133.33%. The figure has increased by a penny over the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $5.35 billion, indicating year-over-year growth of 16.08%.
SNAP’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 81.07%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
What Should Investors Do With SNAP Stock?
Stiff competition from players operating in the video streaming segment and sluggish brand-oriented revenues do not bode well for investors.
Despite an expanding portfolio, demand for SNAP in North America is declining due to weak and volatile brand-oriented demand and stiff competition from newer advertising solutions. In the second quarter of 2024, DAU declined by 1 million to 100 million in North America. This doesn’t bode well for growth-oriented investors.
SNAP stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, SNAP is trading at 3.07X, higher than the Zacks Internet - Software industry’s 2.79X.
SNAP currently carries a Zacks Rank #4 (Sell), and investors should stay away from the stock for now.
Image: Bigstock
SNAP Down 35% Year to Date: How Should Investors Play the Stock?
Snap (SNAP - Free Report) shares have declined 35.3% year to date (YTD), underperforming the broader Zacks Computer and Technology sector’s appreciation of 24.9%.
It has also lagged the Zacks Internet – Software industry, and peers like BOX (BOX - Free Report) , Reddit (RDDT - Free Report) and Vertex (VERX - Free Report) .
Shares of Vertex, Reddit, and BOX have returned 28%, 48.3%, and 53.4%, respectively, over the same time frame. The industry has appreciated 25% YTD.
SNAP shares’ underperformance can be attributed to stiff competition from Meta Platforms, lower brand advertising revenues due to decreased demand in specific consumer discretionary verticals and its popularity with only the younger demography.
Snap Inc. Price and Consensus
Snap Inc. price-consensus-chart | Snap Inc. Quote
Will Expanding Product Offering Aid SNAP’s Prospects?
SNAP is expanding its product offering to drive Daily Active Users, which increased by a mere 2.3% to 432 million in the second quarter of 2024.
SNAP expects DAU to be 441 million in the third quarter of fiscal 2024.
The recently launched AI Lens that allows users to use it as a personal creative director by adding captions and Lenses to Memories is a noteworthy development.
SNAP recently introduced Map Reactions, Editable Chats, and My AI Reminders to enhance user engagement and connectivity.
In the second quarter of 2024, SNAP launched Snap Nation, a development in its collaboration with Live Nation to give users access to tours, behind-the-scenes, and festival experiences.
However, SNAP is suffering from weak demand in specific consumer discretionary segments like retail, technology as well as entertainment. The company’s brand-oriented revenues declined 1% year over year to $1.13 billion in the second quarter of 2024. The trend is expected to continue in the near term, thereby hurting top-line growth.
AI Integration to Strengthen SNAP’s Prospects
SNAP is introducing modifications in its application performances by improving battery management, screen loading latency, and visual quality. It has leveraged generative AI to enhance user experience.
SNAP is integrating AI and ML to enable personalization and content ranking to drive content engagement. In the second quarter of 2024, time spent on watching content increased 10% quarter over quarter. SNAP’s GenAI Lens in collaboration with Beyonce saw an engagement of 80 million within three days.
SNAP’s Earnings Estimates Show Solid Y/Y Growth Prospect
For the third quarter of 2024, SNAP expects revenues in the range of $1.335 to $1.375 billion, indicating 12% to 16% year-over-year growth.
SNAP expects adjusted EBITDA between $70 million and $100 million.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $1.35 billion, indicating year-over-year growth of 13.98%. The consensus mark for third-quarter 2024 earnings is currently pegged at 5 cents, unchanged over the past 30 days, and indicating year-over-year growth of 150%.
For 2024, the Zacks Consensus Estimate for earnings is pegged at 21 cents per share, indicating year-over-year growth of 133.33%. The figure has increased by a penny over the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $5.35 billion, indicating year-over-year growth of 16.08%.
SNAP’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 81.07%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
What Should Investors Do With SNAP Stock?
Stiff competition from players operating in the video streaming segment and sluggish brand-oriented revenues do not bode well for investors.
Despite an expanding portfolio, demand for SNAP in North America is declining due to weak and volatile brand-oriented demand and stiff competition from newer advertising solutions. In the second quarter of 2024, DAU declined by 1 million to 100 million in North America. This doesn’t bode well for growth-oriented investors.
SNAP stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, SNAP is trading at 3.07X, higher than the Zacks Internet - Software industry’s 2.79X.
SNAP currently carries a Zacks Rank #4 (Sell), and investors should stay away from the stock for now.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.