Key Takeaways
- Snap shares fell 14% in a week as weak ad results and outlooks from Alphabet, Reddit and Pinterest hit social stocks, and Meta’s settlement left Snap alone in a teen addiction trial.
- Snap settled with the two teenage plaintiffs on Monday, taking the nearest legal risk off the table.
- Snap reports third-quarter results on Nov. 4, against guidance of 1.70-1.74 billion of revenue and 300-350 million of adjusted EBITDA.
- Most of the drop came from the group, so a quarter in the upper half of guidance would make Snap a buy.
Snap (SNAP) stock is down 14% in the past week, mostly on other companies’ bad news. Alphabet (GOOG), Reddit (RDDT) and Pinterest (PINS) all disappointed on ads, and Meta Platforms (META) settled out of a teen addiction trial, leaving Snap the only defendant until it settled on Monday.
Alphabet and Reddit spooked the ad crowd
Alphabet reported after the close on Oct. 28, and its third-quarter ad sales fell short of estimates. YouTube ads grew about 9% and Google Network was almost flat. That revived fears that AI is eating into digital advertising, and Alphabet is down 12% for the week.
A day later, Reddit warned that if falling referral traffic from Google search keeps up, its fourth-quarter daily users could drop by a low-double-digit percentage. It’s down 34%.
That risk looks smaller for Snap. Snapchat is built around messaging friends rather than search, and its daily users rose 5% to 493 million in the second quarter.
Pinterest’s news hits closer to home: it guided fourth-quarter revenue to $1.425- $1.475 billion, below the $1.52 billion analysts expected.
Snap ended up alone in court, then settled
Jury selection began in Los Angeles on Oct. 28, in what would have been Snap’s first jury trial over claims that social media harms teens. Meta settled on Friday, and Snap followed on Monday, before opening statements, the plaintiffs’ lawyers said.
More trials are coming, though. Snap CFO Doug Hott warned on the Aug. 3 call that they “may result in significant changes to our products and business practices.” CEO Evan Spiegel has said ad revenue from impressions served to users under 18 isn’t material. So the larger risk is design changes that could reduce engagement across all age groups, not a one-time payout.
TIKR tracks 42 analysts on Snap. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Snap, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Snap’s Analyst Ratings
Wednesday’s report has to carry the rest
Analysts expect about $337 million of third-quarter EBITDA on $1.73 billion of revenue, both in the upper half of guidance. Then EBITDA nearly doubles for the year:
Roughly $502 million of that $1.32 billion has to come in the fourth quarter alone. So Snap’s holiday outlook matters as much as the quarter.
Cheap, if the ads hold up
At Monday’s close, Snap traded at 1.3x forward sales, against a five-year average of 4.0x:
42 analysts cover Snap, and the Street’s average target of about $7.40 sits roughly 36% above Monday’s close.
If the quarter lands in the upper half of guidance, Snap looks like a buy here.
Of course, if its fourth-quarter guidance sounds anything like Pinterest’s, expect analysts to cut that $502 million estimate.
So what is Snap stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
