Snap is rallying ahead of earnings

source
Markets Insider

  • Snap reports after Tuesday’s closing bell.
  • Wall Street expects another quarter of losses.
  • The most bearish analyst thinks Snap should be trading at $6 a share while the most bullish say it should be at $18.

Snap shares are spiking, up 1.44% at $14.05 apiece, ahead of the company’s fourth-quarter earnings which are due out after Tuesday’s closing bell.

But earnings expectations aren’t so optimistic. Wall Street expects the social media company to lose $0.32 a share on revenue of $252.82 million. On an adjusted basis, analysts are expecting a loss of $0.16 s share.

Snap has seen a pick up in user growth of late, with a daily active user growth rate of 17% year-over-year in the third-quarter, better than Facebook’s 14% year-over-year DAU growth rate in the fourth-quarter. But Evercore ISI analyst Anthony DiClemente gives Snap a price target of $7, citing poor ability to monetize those users. Analyst Michael Nathanson of Moffet Nathanson is even more bearish, giving the photo-sharing company a price target of $6.

But bullish Goldman Sachs analyst Heath Terry is not dissuaded by Snap’s monetization issues, and has a price target of $18. “While monetization growth has been slower than we previously expected, we continue to believe its audience and engagement represent a unique asset,” Terry wrote in a recent research report.

Meanwhile, Snap’s move to create more programmatic ads “has exceeded management expectations,” he said. And although CPM’s (cost per impression) decreased 60% year-over-year in the third-quarter, hence Snap’s monetization problem, Terry still believes in Snap’s “high value audience” and “rich media inventory.”

Wall Street has a consensus price target of $12.27 with 11 analysts rating the stock a sell, compared with five who rate it a buy.

Snap shares are down about 3.4% this year.