One of the biggest stories of last week was how Snap Inc. (NYSE:SNAP) shares plunged 22% in the week since its latest quarterly results, closing yesterday at US$7.76. The results look positive overall; while revenues of US$1.1b were in line with analyst predictions, statutory losses were 9.4% smaller than expected, with Snap losing US$0.22 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Snap's 38 analysts is for revenues of US$5.10b in 2023, which would reflect a notable 11% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 32% to US$0.47. Before this earnings announcement, the analysts had been modelling revenues of US$5.41b and losses of US$0.49 per share in 2023. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.
The consensus price target fell 22% to US$11.59, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Snap analyst has a price target of US$27.00 per share, while the most pessimistic values it at US$7.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Snap's revenue growth is expected to slow, with the forecast 8.6% annualised growth rate until the end of 2023 being well below the historical 37% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. 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 reconfirmed their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Snap going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Snap that you need to be mindful of.
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