Should you buy Snap ahead of earnings as it’s trading near the oversold zone?

By:
on Apr 19, 2022
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  • We think that Snap will beat analyst expectations in this week’s earnings release.
  • If that happens, the share price will rally between $40 and $55, with a highly improbable loss in value.
  • Buying now at $33 comes with a wide margin of safety as the stock has consolidated prices between $30 and $40.

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Snap Inc. (NYSE:SNAP) will announce Q1 earnings this week on Thursday, April 18. The earnings from the last call were in the red, as is for many tech stocks. However, there is an important pattern to note from the last four quarters. Snap has been beating expectations by more than 100% each time. If the company was to maintain that pattern, the earnings might as well be positive this time.

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The stock price of $33.19 is just above the 200-day moving average of $30. Consensus estimates put Snap above $60, despite the current headwinds in advertising revenue. This being the case, Snap is pleasantly discounted, and investors should take advantage of the price. This week’s earnings could be a catalyst for price appreciation from the current level.

Snap technical analysis

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Source – TradingView

Technical analysis of Snap shows price consolidation between $30 and $40. From the current valuation of $33, the stock is more likely to move up. If the earnings beat expectations, that would be adequate to push the valuation above $40. This analysis projects that Snap will trade between $40 and $55 after the earnings. Resistance is expected at the price of $55.

Summary

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Snap stock could beat investor expectations in this week’s earnings call. If that happens, the stock will rally above $40. This analysis considers the stock a buy despite headwinds in revenue generation from advertising.

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