Earnings season is always an exciting time to be an investor. Investors get backstage access to companies’ financial results, giving them a more precise idea of how smooth (or rough) operations have been.
In addition, stocks generally move up during earnings season – undoubtedly a major positive. With earnings season shifting into full gear, we have a surplus of companies unveiling quarterly results daily.
One company slated to release quarterly results this week after the trading session on Thursday is Snap
SNAP
. Snap’s flagship product, Snapchat, is a mobile camera application that helps people communicate through short videos and images called Snaps.
Snap is currently a Zacks Rank #4 (Sell) with an overall VGM Score of a D. In addition, the company resides in the Zacks Internet – Software Industry, which has a year-to-date return of -51%.
We can look at a few of the company’s metrics heading into the quarterly report to understand how business has been behind the curtains.
Share Performance & Valuation
Snap shares have been the victim of one of the deeper valuation slashes we’ve seen year-to-date, decreasing nearly 70% in value and extensively underperforming its Zacks Industry.
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However, over the last month, Snap shares have found much-needed new life, increasing nearly 15% in value and outperforming its Zacks Industry by a sizable margin.
Image Source: Zacks Investment Research
Snap has elevated valuation levels; the company’s forward price-to-sales ratio of 4.5X is well above its Zacks Industry average of 1.7X. In addition, Snap carries a Style Score of an F for Value.
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Quarterly Performance
Snap has undoubtedly impressed with its bottom-line results, with five triple-digit EPS beats over its last ten quarters. In addition, the company boasts a 27.3% Earnings ESP Score heading into the quarterly report.
Quarterly revenue has primarily been reported above expectations; over its last ten quarters, Snap has recorded eight top-line beats. The chart below illustrates the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Growth Estimates
For the quarter to be reported, analysts have significantly dialed back their earnings estimates, with all seven estimate revisions being negative.
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In addition, the -$0.01 Zacks Consensus Estimate reflects a 110% decrease in quarterly earnings from the year-ago quarter.
However, the top-line appears to be in exceptional shape – the $1.1 billion quarterly sales estimate represents a notable 16% uptick in quarterly revenue year-over-year.
Key Metrics
Investors should keep an eye out for a couple of crucial metrics, including average revenue per user and daily active users.
Currently, the Zacks Consensus Estimate for daily active users throughout the quarter resides at 341 million, a 3.6% uptick from its previous quarter and a 17% change year-over-year.
In addition, the Zacks Consensus Estimate for average revenue per user resides at $3.57, a solid 10.5% change from the previous quarter and a 23% year-over-year change.
Bottom Line
Snap shares have tumbled in the market year-to-date, undoubtedly a reflection of the harsh macroeconomic backdrop we’ve found ourselves in after coming out of a once-in-a-lifetime pandemic.
Furthermore, the company is a Zacks Rank #4 (Sell), has elevated valuation levels, and quarterly earnings are forecasted to decrease quite significantly.
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