It was short lived, but the Snap Inc (NYSE:SNAP) rebound off its August lows is over. What’s more, earnings are just around the corner and another post-report plunge could be in the offing. It’s time, once again, to bet against SNAP stock.
Snap is set to step into the earnings confessional in the first full week of November. Currently, Wall Street is expecting a loss of 15 cents per share on revenue of $240.51 million.
The problem is that, even with losses projected, expectations are still too high.
Sure, Snap has roughly 173 million daily active users, but it still has no idea how to effectively monetize them. (Most likely because most of those users are in their teens and are still depending on mommy and daddy’s cash.)
Sentiment, meanwhile, remains excessively bullish for Snapchat stock. According to Zacks data, only four of the 28 analysts following SNAP rate the shares a “sell.” This figure should be much higher given last quarter’s poor fundamental performance.
Click to EnlargeShort sellers agree.
During the most recent reporting period, the number of SNAP shares sold short soared by 10% to 103.9 million shares. This wealth of short interest is only going to grow, as SNAP stock has shown that it has very little buying pressure as the shares approach the $15-$16 region.
What’s more, short sellers aren’t even bothering to hedge their bets this time around.
Currently, the November put/call open interest ratio rests at a lofty reading of 1.42, with puts easily outnumbering calls among those options potentially most affected by Snap earnings.