What comes after a disappointing quarter – a spectacular comeback, or more disappointment? That’s the billion-dollar question that Snap’s (NYSE:SNAP) shareholders are asking. Snap will soon face a crucial moment, so keep your position in Snap stock small.
You don’t have to sell all your Snap shares. Be ready for unexpected adventures.
I believe Snap has good comeback prospects since the market’s expectations are low. Nevertheless, hedging your bets is the smart move right now.
Snap Stock: Here’s the Date to Watch For
Sources indicate that Snap’s next quarterly data release will occur on April 25. Holding Snap stock through April 25 is a high risk proposition, as the stock collapsed from $17.50 to $11 after Snap published its fourth-quarter and full-year 2023 results.
It was, in some ways, a disappointing report. CEO Evan Spiegel called 2023 a “pivotal year” for Snap, but the company’s full-year revenue was nearly flat when compared to 2022’s revenue. Also, Snap’s fourth-quarter 2023 revenue only grew 5% year over year.
Furthermore, Snap incurred a net earnings loss of $248 million in the fourth quarter, and a loss of $1.322 billion in all of 2023.
Perhaps worst of all, Snap guided for first-quarter 2024 adjusted EBITDA of -$55 million to -$95 million. So, will Snap redeem itself on April 25, when the company releases its first-quarter 2024 results?
Don’t Overlook Snap’s User-Base Growth
Sometimes, low expectations can be a good thing. SNAP stock lost over one-third of its value after Snap’s previous earnings release. The next time around, the market’s sense of dread might result in a positive surprise.
Or at least, there could be a relief rally if Snap’s Q1 2024 results aren’t as bad as expected. As I mentioned earlier, Snap already prepared the market for deeply negative first-quarter adjusted EBITDA.
Analysts expect Snap to post a first-quarter 2024 earnings loss of 26 cents per share. That’s substantially worse than Snap’s fourth-quarter 2023 loss of 15 cents per share.
Besides, the market seems to be ignoring Snap’s daily active user growth. Impressively, Snap grew its DAUs by 10% YOY to 414 million in the fourth quarter of 2023.
In other words, maybe the market will soon recognize Snap’s revenue-growth potential as the company expands its user base.
Snap Stock: Hope for the Best, Prepare for the Worst
It’s no exaggeration to say that April 25 could be a make-or-break day for Snap. So, will Snap disappoint its investors again, or will the company exceed the market’s low expectations?
I like Snap’s comeback prospects, but investors should still prepare themselves for a worst-case scenario. Using a stop-loss might not be helpful if Snap stock quickly collapses on April 25.
Therefore, the prudent strategy is to keep your share size very small, or even cash out completely, before Snap unleashes its upcoming round of quarterly data.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.