Snap Stock Presents Major Growth Opportunity

SNAP is poised for serious growth pending a strong earnings report

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Snap Inc. (NYSE:SNAP) is an American social media company, well-known for its Snapchat platform. The company is slated to report earnings on October 20 after hours. This financial report will serve as a pivotal opportunity for SNAP stock to keep pushing for new highs. SNAP stock only recently surpassed its IPO price of $24, and has yet to beat its all-time high stock price of $29.44, set the day after SNAP stock's initial public offering. SNAP stock has recently seen a positive surge, despite hitting a 52-week low of $7.89 earlier in year. SNAP stock is up nearly 40% year-to-date and has more than tripled in value since its lows in March. As we await earnings, a closer look into the company’s fundamentals will allow investor’s to properly evaluate the stock along with the quarterly report.

Snap has a market cap of $40.89 billion and a book value of $1.50 per share. Its price-to-book (P/B) ratio stands at 18.63. A stock's
 P/B ratio of the market value of a company's shares over its book value of equity. The company has a forward price-earnings ratio of 322.58 and no trailing price-earnings ratio.

Snap has beat expectations in two of its last four quarterly earnings reports. In the most recently reported quarter, the company met expectations with loss of -$0.09. For the fourth quarter of 2019, Snap reported a positive EPS of $0.03, beating expectations by $0.02. In the upcoming SNAP stock quarterly earnings report --set for after-the-close on Tuesday, Oct. 20 -- Snap is expected to report an EPS of -$0.05 and resume its upward trajectory from the fourth quarter of 2019. The company has a trailing 12-month EPS of -$0.78.

Snap has grown its revenue by nearly $400 million on an annual basis since 2016. In 2019, Snap grew its revenue by more than $500 million. Snap has continuously reduced its net losses since 2017.  Snap currently has $2.83 billion in cash and $1.94 billion in total debt. The company’s balance sheet holds $4.70 billion in total assets and $2.51 billion in total liabilities. Snap's total equity currently stands at $2.20 billion.

In short, SNAP has room for exponential growth. The company is working to compete with Facebook (FB) after refusing offers for its acquisition back in 2014. Although this may look like an impossible challenge, Snap has pulled through despite Zuckerberg’s attempts to overthrow Snapchat with Instagram Stories. Snapchat continues to thrive amongst young people. Snapchat reportedly reaches 90% of people 13-24 years old in the U.S., and 80% in the UK, France, Canada, and Australia.

The company seeks to continue growing its 238 million users and increase its profits by expanding its app into new territories. The company has already taken steps in this direction with its various community features, maps, games, and original content. Further, SNAP stock seems to be in a good position from a fundamental point of view. The company has nearly $1 billion more in cash than they do in debt, and the company’s revenue grows significantly year after year. Snap was pushing towards profitability prior to the pandemic. Although the company was set back from losses in ad revenue like most social media giants, the company seems to be on the right track to resuming its upward trajectory. If all goes as expected (or better) in Snap's upcoming earnings announcement, SNAP should reflect more optimism and push to new highs.

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