Snap Inc (NYSE:SNAP) reports earnings today after market close. It’s been a crazy four-month start to the year for Snap Inc and SNAP stock and earnings could make it even crazier.
Investors are running scared according to Robinhood, the trading app loved by millennials. It suggests that investors are selling SNAP stock 14% more than they’re buying it in the days and hours before revealing its latest financial numbers.
Especially cynical are investors over the age of 30 who are selling SNAP shares 19% more than they’re buying them, a sign this age group doesn’t believe the Snapchat redesign will make a difference to the company’s future.
Nor do analysts.
Analysts Not Convinced
In February, after delivering better than expected fourth-quarter earnings, the company’s first time beating estimates, Citigroup analyst Mark May downgraded SNAP stock from neutral to sell on fear the company’s redesign has generated far more negative reviews after the redesign than before.
“While the recent redesign of its flagship app could produce positive long-term benefits, the significant jump in negative app reviews since the redesign was pushed out a few weeks could result in a decline in users and user engagement, which could negatively impact financial results,” May wrote in a note to clients February 21.
That’s not the analyst’s only beef with the social media app. He also added that Snap might need to go to the markets to raise additional funds in 2020 just to keep the lights on.
That’s not good.
May’s not the only one who’s got some concerns with SNAP stock. Earlier in the year, Raymond James analyst Aaron Kessler downgraded it from market perform to underperform, arguing that Snap Inc may never profitably monetize Snapchat.
According to MarketWatch, the 25 analysts that have an earnings estimate for SNAP expect the company to lose $0.29 a share in the first quarter and $1.06 for fiscal 2018 in its entirety.
Zack’s consensus estimate is slightly more generous expecting Snap Inc. to lose $0.17 a share in the first quarter on $247 million in revenue. Year over year, if its consensus estimate is on the money, Snap Inc should see its loss per share decline by 15% with a 65% increase in revenues.
While that sounds great, it’s possible the numbers could be much worse as celebrities — such as Kylie Jenner — abandoned the social media platform this quarter.
As far as user growth and engagement, Snapchat added eight million net new users in the fourth quarter. Citi’s May expects Snap to grow daily active users (DAUs) by seven million in the quarter which would bring its total to 194 million.
By comparison, Instagram Stories has over 300 million daily active users, 55% more users than Snapchat, in less than two years up and running.
Bottom Line on SNAP Stock
I’ve never been a fan of SNAP stock. So for me, unless Evan Spiegel crushes earnings for a second consecutive quarter, I’m with InvestorPlace’s Dana Blankenhorn who’s skeptical about Snap Inc’s future.
“SNAP may gain a niche, but it won’t win the market. It may make money, but it’s not going to be Facebook,” Blankenhorn wrote February 9. “Your money can do better.”
It sure can.
It’s called Facebook Inc. (NASDAQ:FB).
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.