SNAP Inc

Snap Inc. (NYSE: SNAP) is a camera manufacturer. Snapchat, the company's primary product, is a camera app that allows users to interact visually with friends and family via brief movies and photographs known as Snaps. Snapchat is the company's main mobile application, with five tabs. Camera, Communication, Snap Map, Stories, and Spotlight are among the tabs.

Key Developments

• Snap CEO Evan Spiegel said in an internal memo on May 24, 2022, that the firm will miss its sales targets for the quarter. The business also filed an 8-K stating that sales and adjusted EBITDA for Q2 2022 will be lower than expected. Snap will also restrict its recruiting speed, a strategy that firms like Meta and Uber have used to save money.
• The corporation has been impacted by the iOS privacy adjustment from last year. When iOS users were given the option to opt out of off-app monitoring, most of them elected not to provide their apps any more personal information, negatively impacting the ad revenue of social apps like Snapchat and Facebook.
• As firms cut ad expenditures, macro challenges are expected to spread to all digital advertising industry.
• The closing price as of May 24, 2022, was USD 12.79, fallen 43.08% on the release of this information in the market.
• Given Snap's scale, the company's comments have had an outsized influence. It only makes a fraction of the money that Facebook, and Google make in a quarter. Last month, Facebook cautioned investors that revenue in the second quarter might fall short of expectations, a startling admission from a business that had never seen anything less than double-digit growth until this year.
• SNAP stock is in a downtrend from the previous year September after making a high of USD 83.34 and since then has corrected almost 84.65%. The current price is below both short-term (50-day) SMA and long-term (200-day) SMA.
  

Important Financial Highlights: Q1FY22

• The company's daily active users increased 18 percent year over year to 332 million, and revenue increased 38 percent to USD1.06 billion in the first quarter of 2022. This resulted in USD64 million in adjusted EBITDA and USD106 million in free cash flow, marking the third consecutive quarter of positive free cash flow.
• In the first quarter, Snapchat partnered with News U.K., TF1, and Le Monde in France, as well as MBC and Al Arabiya in the Middle East, to boost its international content offerings.
• Finally, as indicated in the first quarter results, the Q2 2022 Outlook was Revenue growth was predicted to be between 20% and 25% year over year, with Adjusted EBITDA between breakeven to USD50 million, however the company's forecast has since been reduced on May 24, 2022, to be worse than expected.

Stock Recommendation

SNAP's stock price has fallen 74.73% in the past six months and is currently leaning toward the lower end of its 52-week range of USD 12.55 to USD 83.34. 

Given the stock's considerable bearish price movement over the past six months, financial results, and technical analysis and the recent news update from CEO Evan Spiegel about bearish outlook, we propose a "Watch" rating on the stock at its closing price of USD 12.79, as of May 24, 2022.

1-Year Price Chart (as on May 24, 2022). Source: REFINITIV, Analysis by Kalkine Group.

Technical Analysis Summary

* Closing price as of May 24, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.