Is Snap stock a buy or sell as shares plunge 25% after revenue miss?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 22, 2021
  • Snap shares on Friday plummeted more than 25% after announcing its most recent quarterly results.
  • The company reported its fiscal Q3 results Thursday after markets closed, beating earnings estimates.
  • However, revenue for the quarter came short of Street forecasts despite surging more than 57% Y/Y.

On Friday, Snap Inc. (NYSE:SNAP) shares plummeted more than 25% after its FQ3 revenue failed to match analyst estimates. The company announced its most recent quarterly results Thursday after markets closed, beating consensus Street estimates on earnings.

Snap posted Q3 non-GAAP earnings per share of $0.17, outperforming the consensus Street estimate of $0.08. In addition, its GAAP EPS of -$0.05, also beat the average analyst forecast by $0.05, while revenue for the quarter of $1.07 billion was slightly below estimates by $30 million, despite surging 57.6% Y/Y.

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The company said its revenue miss was attributed to a recent change in Apple Inc.’s (NASDAQ:AAPL) iPhone privacy changes, allowing users to choose whether to allow apps to track their online activity. 

Snap’s revelation triggered a wave of stock price crashes in digital tech, with Facebook Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOG), and Twitter Inc. (NYSE:TWTR) all falling in the aftermath.

Is it too late to sell Snap?

From an investment perspective, Snap shares trade at a steep forward P/E ratio of 71.30, making the stock too expensive for value investors.

However, with analysts expecting its earnings per share to spike by more than 117% next year, SNAP could be a compelling option for growth investors.

Therefore, investors could be best placed to wait for a rebound before selling. 

Source – TradingView

Technically, SNAP shares seem to have recently plummeted, completing a downward breakout from a sideways channel formation. As a result, the stock has moved to oversold conditions, creating an opportunity for a rebound.

Therefore, investors could target potential rebound profits at about $62.08, or higher at 466.06, while $52.73 and $48.33, are crucial support zones.

Buy the rebound?

In summary, with Snap shares plummeting to oversold conditions, the stock seems poised for a short-term rebound.

Therefore, given the company’s earnings growth prospects for next year, now may not be the time to sell the stock.

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