Snap Inc. (NYSE:SNAP) Just Reported Earnings, And Analysts Cut Their Target Price

It's been a mediocre week for Snap Inc. (NYSE:SNAP) shareholders, with the stock dropping 15% to US$8.73 in the week since its latest quarterly results. It was a moderately negative result overall - revenue fell 2.2% short of analyst estimates at US$989m, although at least statutory losses were marginally smaller than expected, at US$0.21 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Snap

Taking into account the latest results, Snap's 38 analysts currently expect revenues in 2023 to be US$4.56b, approximately in line with the last 12 months. Losses are expected to be contained, narrowing 10% from last year to US$0.78. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$4.70b and losses of US$0.65 per share in 2023. So it's pretty clear the analysts have mixed opinions on Snap after this update; revenues were downgraded and per-share losses expected to increase.

The average price target fell 9.1% to US$9.79, implicitly signalling that lower earnings per share are a leading indicator for Snap's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Snap at US$16.00 per share, while the most bearish prices it at US$6.50. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Snap's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 0.9% growth on an annualised basis. This is compared to a historical growth rate of 33% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 9.7% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Snap.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Snap's future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Snap going out to 2025, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Snap , and understanding these should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.