Buy Snap Stock
Snap Inc. (NYSE:SNAP) as an investment is quite controversial. The company posted record Q4 growth quarter after quarter, and it even became briefly profitable at the height of its growth. But as the economy turned and sentiment turned towards the bottom line, shareholder destructive actions were severely punished by the market. This is evident in the stock returns as well, as Snap Inc. lost more than 80% of its value over the course of the year.
buy snap stock
After Snap (SNAP 1.21%) stock shed 81% in 2022, and with its full-year earnings report slated for Jan. 31, it might be tempting to embark on a bottom-fishing expedition with the company. After all, value seekers are supposed to buy when there's blood in the streets, right?
Sticking with the theme of searching for value, we can compare Snap with some of its peers to get a feel for whether it's overpriced, underpriced, or somewhere in between. Just because Snap stock is down nearly 80% from its all-time high tdoesn't mean it can't go lower.
Snap (SNAP 1.21%) stock plunged 27% during after hours trading on Oct. 20 following the release of its third-quarter earnings report. The social media company's revenue rose 6% year over year to $1.13 billion, missing analysts' estimates by $10 million. Its net loss widened from $72 million to $360 million, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) plunged 58% to $73 million. But on a non-GAAP basis, earnings of $0.08 per share still beat the consensus forecast.
Investors had already been bracing for a rough report following Snap's dismal second-quarter release in July, but the latest news seemed to extinguish any hopes for a near-term recovery. Should investors shun Snap stock at these depressed levels, or should they take the contrarian view?
That's why it was baffling when Snap authorized a $500 million stock buyback for the next 12 months. Management likely wants to capitalize on the low stock price to offset the dilution from stock-based compensation (30% of third-quarter revenue), but it's still a bad look for a company that lost $1.14 billion in the first nine months of 2022 and just laid off a fifth of its staff.
Analysts believe Snap's revenue will increase about 12% to $4.63 billion this year and maintain that pace in 2023. Adjusted EBITDA should decline 44% to $346 million this year before doubling to $675 million in 2023. Based on that outlook, the stock looks cheap at 2.5 times sales and 19 times adjusted EBITDA for 2023.
Investors were largely unimpressed by the company's lack of revenue growth, and Snap stock sank by more than 10% the following day. But the pessimism lifted when the company's main rival, Meta Platforms, released its own results, which outperformed across the board.
It gave investors hope that Snap's challenges will resolve in the coming quarters, so they rushed back into the stock, sending it up 10% on Feb. 2. But Snap stock could be a buy right now on its own merits, and there is one number in particular that has consistently climbed despite a challenging economic environment.
I touched on the weak economy, which is suppressing advertising revenue for social media companies at the moment. But those conditions won't last forever, and that leads to the one big reason to buy Snap stock now: user growth.
If DAU and ARPU continue to climb in 2023, the company could see a drastic reacceleration of its revenue growth. With a better economic outlook combined with Snap's continued investments in improving the advertising experience for businesses, the company might be set up for a big year. That's good news for potential investors, who can buy the stock right now at an 86% discount to its all-time high.
Social media platform Snap (SNAP) continued its run of posting nightmarish earnings with its most recent Q2 results. The weak economy, cut-throat competition, and privacy changes from Apple (AAPL) have stopped it in its tracks. As a result, SNAP stock has shed a whopping 85% of its value in the past year and now trades at a more attractive multiple. Despite its troubles, it has an excellent growth runway ahead, which investors should ignore. Hence, we are bullish on SNAP stock over the long haul.
On the flip side, there are positives from its recent performances, which point to the depth of its business. Its stock will likely pull back some more, considering a weak outlook in the interim. However, it might be an interesting time to pick up the stock at multi-year lows.
Snap and its shares have taken a beating over the past several months. Its operating performance has been underwhelming, while its stock price has dropped at an alarming pace. However, if we look past its near-term headwinds and consider its strong future outlook and attractive price point, SNAP stock seems like an interesting Buy at this stage.
Perhaps the most attractive aspect of SNAP is its attractive share price. Its stock has been torn to shreds and trades at 4.2x forward 2022 sales. Its five-year average is at over 18x forward sales, representing a steep drop in value for SNAP stock.
Highlighting these challenges, Bernstein analysts downgraded the social media stock to market perform from outperform, saying Snap has lost its growth momentum. In a note to clients, the equity research firm said:
Social media company Snap (SNAP), creator of the Snapchat app, is breaking new ground in the field of augmented reality and is in a good position to cash in as the metaverse develops. Is Snap stock a buy?
Technology leadership in augmented reality is why Snap was selected as one of the best metaverse stock plays by Jefferies analyst Brent Thill. However, Snap stock was hit hard after Cowen analyst John Blackledge downgraded the company based on lingering concerns over changes Apple (AAPL) made to its operating system last year.
Key pieces of equipment for the metaverse include augmented reality smart glasses. It's where Snap has a leadership roles and why Thill sees Snap as a top metaverse stock play. Thill has a buy rating on Snap and price target of 65. One week after Thill's report, however, Blackledge slashed his price target on Snap to 45, from 75. He also downgraded Snap stock to market perform, from outperform, over concerns of a slowdown in advertising, which accounts for the bulk of company revenue.
The impact that the omicron variant could have on social media stocks as the new year begins remains unclear. When the pandemic kicked up in 2020, consumers flocked to social media sites such as Pinterest (PINS), Etsy (ETSY) and Snap for various reasons. The stocks steadily climbed but reversed as quarantines ended.
Digital ads overall will exceed 60% of global ad spending for the first time in 2022, according to Zenith Media. Zenith expects social media stocks will see ad spending rise to $177 billion in 2022. It will overtake television and further surge to $225 billion by 2024, Zenith says.
The IBD Stock Checkup tool shows that Snap has a weak IBD Composite Rating of 35 out of a best-possible 99. When choosing growth stocks for the biggest potential gains based on the CAN SLIM investment paradigm, focus on those with a Composite Rating of 90 or higher.
SNAP has a lowly Relative Strength Rating of 10. The rating means that snap stock has outperformed just 10% of all stocks in the IBD database over the past 12 months. Ideally, look for stocks with a rating of 80 or higher.
With the stock market in a correction mode, Snap stock currently not a buy. Growth and technology stocks have been hit hard recently, which makes stock purchases a risky proposition at this time. Markets have dropped as investors grapple with the prospect of higher interest rates and mixed company earnings.
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After gaining 59% in its first two days as a public stock, Snap (SNAP) shares dove on Monday as several brokers came out with sell recommendations. They closed at $23.77, down 12% for the day and 19% off the high. The drop meant that anyone who didn't buy at the pre-trading IPO price of $17 was probably sitting on a loss. 041b061a72
