Snap Inc. (NYSE:SNAP) provides technology and social media services. The company’s principal product, Snapchat, is a camera application that helps people to communicate through short videos and images. Furthermore, the struggling company will be releasing its quarterly earnings report after the market closes on August 10.
Snap Inc. currently sports a Zacks Rank #4 (Sell) and defeated its earnings estimates last quarter by meager 0.86%. Additionally, the company operates in the Internet-Software industry, which sits in the bottom 42% on the Zacks Industry Rank.
Regardless of Snap’s Earnings ESP of 3.45%, the company holds an inadequate Zacks Rank and is expected to release lackluster earnings of -$0.29 per share, which provides a murky financial outlook for the firm.
If that’s not enough, here are 3 additional reasons to be cautious on Snap as we near its earnings report date:
1. Signs Of An Overvalued Investment
Snap currently holds an “F” grade for Value in our Style Score system, which means that we view the company as overvalued. For example, Snap Ifeatures an Earnings Yield of -20.24% and price/sales ratio of 9.06, both of which fall short of the industry averages of -2.12% and 3.62, respectively. Furthermore, Snap Inc. holds an underwhelming P/E ratio of -4.80 and lackluster PEG ratio of -0.09. These metrics show that Snap Inc. might not be the smartest security to buy for an investor seeking impressive value on the market.
2. Negative Earnings Estimate Revisions
Earnings estimate revisions are the main ingredient for determining a company’s Zacks Rank. Snap possesses a murky future pertaining to earnings. For example, as of 30 days ago, Snap Inc.’s current quarter earnings estimates were revised to -$0.29 per share, which signifies a downward trend of -7.41%. Also within the past 30 days, Snap’s full-year EPS estimates fell from -$2.66 to -$2.71 per share, which constitutes a decrease of -1.88%. Overall, nine analysts covered Snap Inc. for this quarter’s earnings release, and two negative revisions have been made.
3. Poor Share Price Performance
Snap’s stock has been retreating since its initial public offering back in early March, without showing many signs of hope. Currently, the stock is trading at around $13.51, which is not too far off its all-time low of $11.91. Snap’s all-time high of $29.44 was reached right after its IPO, a period in which a stock’s price tends to rise considerably.
In essence, Snap’s share price has fallen by 54.11% since this high was recorded, including a drop of a whopping 15.84% within the past four weeks. Those who have held on the stock since its initial public offering could continue to pay the price this earnings season.
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