Is Snap Poised for a Turnaround?

Chris Lange

Snap Inc. (NYSE: SNAP) is set to report its third-quarter earnings results after the markets close on Thursday. Thomson Reuters consensus estimates call for a net loss of $0.14 per share on $283.21 million in revenue. In the same period of last year, Snap said it had a net loss of $0.14 per share and $207.94 million in revenue.

This company might be poised for a turnaround, despite most of Wall Street betting against the camera app. In fact, a recent memo leaked from the company had CEO Evan Spiegel calling for break-even earnings in the fourth quarter and potential profitability in the future.

The company also is working on new designs of its Discover section in the Snapchat app, which shows content from professional media companies and celebrities.

Despite saying what Snap plans to do, the memo does address the many senior executives who have either left or announced their intention to leave in the past 18 months.

Spiegel acknowledged the shortcoming of the recent app redesign. He noted that the firm rushed the redesign “solving one problem but creating many others.”

In terms of the full year profitability, Spiegel said in the memo:

Our 2019 stretch output goal will be an acceleration in revenue growth and full year free cash flow and profitability. With profitability comes increased autonomy and freedom to operate our business in the long term best interest of our community without the pressure of needing to raise additional capital.

Excluding Thursday’s move, Snap has underperformed the markets, with the stock down 55% in the past 52 weeks. In just 2018 alone, the stock is down roughly the same amount.

A few analysts weighed in on Snap ahead of the report:

  • Stifel has a Hold rating with a $9 price target.
  • Cowen has an Underperform rating with a $6 target.
  • SunTrust Banks has a Hold rating with an $8 price target.
  • Wedbush has a Buy rating with a $12 price target.
  • Credit Suisse has an Outperform rating and a $12 target.
  • Pivotal Research has a Buy rating with an $8 price target.

Shares of Snap were last seen up about 5% at $6.92, with a consensus analyst price target of $9.95 and a 52-week trading range of $6.46 to $21.22.