Snap stock price will likely be highly volatile on Tuesday as the social media giant publishes its financial results. These numbers come as the shares hovers at a crucial make-or-break point, where it has failed to break below several times since 2022. This article explores what to expect when it releases its earnings.
Snap earnings ahead
Snap, a leading social media company in the US, has been under pressure in recent years. It has dropped by 90% from its highest level on record, erasing over $144 billion in value as the market cap dropped from over $160 billion to $16 billion.
The company has faced major challenges, with the most important one being competition from firms like TikTok and Instagram. TikTok has captured its most important demographic, pushing advertisers to its platform.
As a result, its revenue growth has been relatively weak over the past few years. Its annual revenue stood at over $5.36 billion in 2024, up from $ 4.60 billion the previous year.
Also, the company has struggled to turn a profit as its annual loss in 2024 stood at $672 million, an improvement from a year earlier.
The next key catalyst for the Snap stock price will be its earnings, which are scheduled on Tuesday this week.
Its most recent results showed that its revenue rose by 14% to $1.55 billion. Snap’s net income rose to $9 million after it reported a $248 million loss it made a year earlier. Most importantly, the company’s free cash flow improved to $182 million.
The results showed that Snap had 453 million users in the fourth quarter, a 9% annual increase. While this is good, the vital North American segment had stagnant users at 100 million. This is notable since it makes most of its revenue in the United States. Its North American revenue was $969 million in the quarter.
Wall Street analysts believe that Snap’s revenue rose by 12.5% in the last quarter to $1.35 billion. Its guidance for the current quarter is expected to be $1.38 billion, while the annual figure will be $5.97 billion.
Analysts have a more optimistic outlook on the Snap stock price. The average target is $11.3, higher than the current $8.55. They cite the fact that the company will become profitable this year. The average EPS is expected to be $0.35 this year, followed by $0.05 next year.
Snap stock price analysis
The weekly chart shows that the Snap share price has been in a strong bearish trend in the past few months. It has dropped from a high of $17.53 in July last year to the current $8.7. The stock has remained below the descending channel shown in purple.
It has remained below all moving averages, a sign that bears remain in control. The most notable technical factor is that it sits at a crucial support level at $7.5, where it has failed to move below since 2022. That is a sign that short-sellers are afraid of shorting below that level.
Therefore, the stock will likely be highly volatile after its earnings. A drop below the support at $7.5 will point to more downside as it will signal more downside, potentially to $5. The alternative scenario is where it rises to $10.
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