Snap (NYSE: SNAP) Gains Raft of Shifting Price Targets as Earnings Beat, Stock Drops

Snap's stock (NYSE: SNAP) had a very volatile 24 hours, gaining more than 10% in the after hours session as earnings came through, only to be slapped back down into negative territory through the day. After reaching levels above $13 and appearing in breakout territory, the stock reversed track and ended the day 8.36%, for more than a 20% swing.

With EPS coming in at $0.16 against consensus of $0.14, and revenue of $1.56 billion against an expected $1.55 billion, there are some who would be expecting price action to behave quite differently, but as it has it, analysts were swift to readjust their view on the stock, with no fewer than 6 revisions.

The six firms to adjust on the day moved in differing directions, with an equal split of three moving upwards, and shifting down. Wells Fargo were the most bullish of those to revise down previously, with the trim coming as Snap is seen to be entering a reinvestment phase.

Operationally, Snap reported a notable increase in its daily active users, adding approximately 10 million users. This user growth exceeded Snap's prior guidance by about 2 million, indicating a promising uptrend in user engagement.

Despite these optimistic results, Snap's financial health presents a mixed picture. The company maintains strong liquidity, as indicated by a current ratio of 4.04. However, Snap reported a negative EBITDA of $768.16 million over the last twelve months, indicating ongoing challenges in achieving profitability.

In terms of segment performance, Snap's Snap+ and direct response (DR) segments grew by 14% year-over-year, showcasing robust performance areas. Conversely, the brand advertising segment experienced a slight 1% decline during the same period.

Looking ahead, Snap's guidance for the first quarter of 2025 suggests revenue growth is expected to increase by 10-14% year-over-year. Analysts are optimistic about Snap's future profitability, forecasting an EPS of $0.27 for 2024.

While Snap shows clear signs of progress in user growth and certain revenue segments, challenges related to profitability and segment-specific performance persist. Analysts have been quick to react to the shifting focus at the firm, yet remain clearly split on the implications. The current consensus of $13.07 reflects upside from the current price action, however as we have seen, these are subject to rapid change. Further diligence into the next phase of Snap could be well advised before considering making any sudden moves.