Snap Inc., the parent company of Snapchat, is poised to announce its fiscal fourth-quarter 2023 results on Tuesday, February 6, 2024, after the market closes. Analysts anticipate that the company will surpass consensus estimates for both revenues and earnings. In the previous quarter, Snap exceeded expectations, with revenues rising by 5% year-over-year to $1.19 billion. This growth was primarily driven by a 12% year-over-year increase in average daily active users, although it was partially offset by a decline in average revenue per user (ARPU) from $3.11 to $2.93. The anticipated growth in the user base is expected to be a key driver of Snap’s Q4 results.
Despite Snap’s positive performance in recent quarters, its stock price has experienced significant volatility, dropping by 70% from levels of $50 in early January 2021 to around $15 currently. This decline contrasts sharply with the performance of the S&P 500 index, which saw a 30% increase over the same period. However, Snap’s stock returns have been erratic, with -6% in 2021, -81% in 2022, and 89% in 2023. Comparatively, the S&P 500 returns were 27% in 2021, -19% in 2022, and 24% in 2023. This inconsistency in Snap’s performance relative to the broader market highlights the challenges faced by individual stocks, particularly in the technology sector.
In light of the current macroeconomic environment characterized by high oil prices and elevated interest rates, there is uncertainty surrounding Snap’s future performance. The question arises whether Snap will continue to underperform the S&P 500, as it did in 2021 and 2022, or if it will stage a recovery.
According to our forecast, Snap’s valuation is estimated to be $14 per share, representing an 18% downside from its current market price of around $17.
In conclusion, while Snap has demonstrated strong user growth and revenue generation, its stock performance has been volatile and unpredictable. Investors should closely monitor the company’s Q4 2023 results and outlook to gauge its potential trajectory in the coming months.
