Snap Inc. crushes Q3/2020 expectations, up 20% with new All Time Highs

October 22, 2020 11:30

Snap Inc. crushes Q3/2020 expectations, up 20% with new All Time Highs

On Tuesday, after markets closed, Snap/#SNAP, the American camera and social media company posted a surprisingly strong earnings report for Q3/2020, causing the stock to soar over 20% in after-hours trading.

But numbers should be taken with a grain of salt as we will see in the following.

#SNAP at new All Time Highs despite a net loss of $200 million in Q3/2020

The sharp rise of more than 22% in the after-hours on Tuesday certainly finds its driver in the unexpected, adjusted profit along with positive user and revenue growth over the last quarter.

Snap reported the following:

  • A net loss of $200 million, despite a positive tendency, with its loss being 12% down from the $227 million of last year.
  • Adjusted earnings per share (EPS) came in at 1 cent vs. an expected loss of 5 cents per share
  • Daily active users came in at 249 million, up nearly 4% from the 238 million the company reported in July and the 210 million daily users Snap reported a year prior

What remains to be seen now is if the social media company can continue to perform well in the next quarter. While Snap expects a revenue growth of 47% to 50% (YoY) and around 257 million daily active users in Q4/2020, it also expects expense growth to be higher in the fourth quarter (YoY) than it has observed year to date.

However, we remain bullish for the stock.

We pointed out in an earlier blog article on Facebook, writing

[…] if Facebook does not find a solution in regards to the moderation of hate and disinformation (…) the companies now boycotting and/or cutting their marketing expenses because of the Coronavirus pandemic could probably never return in the future. […]

Snap seems to have done a very good job here, using the Facebook ad boycott as an opportunity to engage with advertisers and agencies in real time to ensure that Snap's existing partners, as well as new prospects, understood the companies offering in relation to their values, as Snap's Chief Business Officer Jeremi Gorman communicated.

How can you trade #SNAP in this environment?

On a daily time-frame, #SNAP remains bullish as long as the long-sequence is not breached, which would occur if the stock breaks below 20 USD, most likely corresponding with a drop back below the SMA(200).

In fact, the gap up after the earnings release is a strong bullish sign, even though the mode is a little extended on the upside. Traders should wait for a pullback to 27.70 USD, a little lower to a test of the July highs at around 26.50, then targeting for a run up to 35.00, and perhaps even higher up to 40.00 USD:

Admiral Markets MT5 with MT5SE Add-on #SNAP CFD Daily chart Source: Admiral Markets MT5 with MT5SE Add-on #SNAP CFD Daily chart (between May 24, 2019, to October 21, 2020). Accessed: October 21, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2017, the value of #SNAP decreased by 40.3%, in 2018, it decreased by 63.1%, and in 2019, it increased by 196.37%, meaning that since its IPO in March 2017, it is up 92.97%.


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