Snap Inc. shares have soared this year on expectations that the company is finally turning its business around, and the Snapchat maker will be looking to prove that narrative next Tuesday when it reports second-quarter earnings after the closing bell.
What to expect
Earnings: Analysts surveyed by FactSet project that Snap SNAP, -3.19%[1] lost 10 cents share on an adjusted basis, compared with a loss of 14 cents a year earlier. According to Estimize, which crowdsources projections from hedge funds, academics, and others, the average estimate is for an 8-cent loss.
Revenue: The FactSet consensus calls for $358 million in revenue, while the Estimize consensus models $363 million. A year prior, Snap posted revenue of $262 million.
Stock movement: Snap shares have only posted gains following two of the company’s nine earnings reports since it went public. The stock tends to make big swings, moving by a double-digit percentage the day after seven of the nine reports. Shares have enjoyed a big rally so far this year, rising 174% as the S&P 500 SPX, -0.43%[2] has climbed 20%. Of the 38 analysts tracked by FactSet who cover the stock, eight have buy ratings, 24 have hold ratings, and six have sell ratings. The average price target is $13.19, 13% below current levels.
What to watch for
Snap has finally updated its Android app and introduced new buzz-worthy features, developments that are expected to have drawn more users to the Snapchat app in recent months.
“With the Android rebuild stunting user growth for much of 2018, the launch of the updated app is supporting a resurgence in Android users,” wrote Jefferies analyst Brent Thill, who expects that time spent on the Snapchat app “is relatively stable.” He has a hold rating on the shares.
Goldman Sachs’ Heath Terry, who rates the stock a buy with a $18 price target, sees “positive trends in user growth and engagement.”
The FactSet consensus models that Snap had 191.9 million daily active users during the quarter, up from 190 million in the March period and 188 million a year earlier. That count might end up being even higher, however: Analysts at both Bank of America and MoffettNathanson have argued that Snap could positively surprise[3] with its user numbers.
Read: Snap shorts are down $1 billion in paper losses this year[4]
Terry expects that Snap has made progress on the advertising front as well.
“Our checks with advertisers also lead us to believe that the company’s continued innovation in its ad-stack, particularly in self-serve, should allow...