We see a risk that Snapchat app usage doesn't match the high expectations implied by SNAP shares tripling in value since March. Earnings are reported after the close today.
Chart: Snap vs. Facebook, Twitter & S&P 500 (year-to-date)
Expectations are for a loss of 9c per share on $418.6 million in revenue. The shares have tripled in value since hitting a March low of $8, now resting above $25- short of record highs at $29.44. Shares of social media companies have soared on expectations that the applications would be used even more during economic lockdown.
In the case of Snap, there may be a disconnect between the share price and app usage. App downloads in Q2. Data from Bank of America has Snapchat downloads actually falling 13% over last year, while Instagram downloads rose 33%.
Downloads don’t affect existing user hours but don’t bode well. Additionally, some of the gains come off the back of a possible (but unlikely) ban of rival app to Snapchat, TikTok by the US government. We wonder if bullish investors should ‘snap out of it’…
Snap shares are up 50% year-to-date versus 17% for Facebook and 15% for Twitter and 0% for the S&P 500. Earnings disappointment - or even profit-taking could see the shares drop to fill the performance gap.
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