SNAP earnings! Let's Chat about Snap-backs
Snap, Inc. $Snap Inc(SNAP)$ social media platform Snapchat is reporting Q1 2022 earnings after market close on 21 Apr. Revenue is estimated to top US$1.06 billion, 38.2% increase year-on-year (y-o-y), with global Daily Active Users (DAU) reaching 328 million, 19.3% growth y-o-y. DAU is the measure of unique users who login to the app and perform some tasks daily.
Its impressive DAU growth is attributed to riding the Augmented Reality (AR) wave. With innovative features such as Lens Studio 2.0, Camera Kit, Snap Minis and Bitmoji for Games, Snapchat is continuing to attract Gen Z (13-24 yrs old) users and advertisers alike. Headwinds it faced are similar to other ad-revenue dependent rivals, chief among them the Meta Platforms, where privacy concerns cut its ability to target users with ads and cut back of businesses advertising budgets in light of high inflation and rate hikes.
Snappy Price Action
What I’ve found intriguing about SNAP price action is its tendency to snap-back up and down double-digit % around earnings. Take the three most recent quarters (see chart below). In July 2021 quarter earnings, price (1) snap-back up 16% from low after earnings beat and huge DAU growth, and it actually outperformed both Meta and S&P500 for the next few months. Then, Apple’s iOS privacy settings changes that block the ability of advertisers to track users in July 2021 caused price to (2) snap-back down 20%, and it performed worse than Meta and S&P500. In the most recent Feb quarter, price dropped with Meta’s poor reporting but the very next day (3) snap-back up 58% with its first-ever quarterly profit.
SNAP snap-back up and down price action around Earnings
So, what's in store come this earnings? Looking at the Daily chart (below), $Snap Inc(SNAP)$ is trading in a downtrend channel since last Oct. If there is positive beat, I would target Long with potential snap-back up to 16.88%, to the top of the channel at $36. If negative results, a potential snap-back down of up to 9.44% might favour a Short to the bottom of the channel around $27.71.
Daily Chart SNAP snap-back up and down targets
Do be cautious and decide if such snap-backs and potentially large price swings are within your risk tolerance and comfort level to trade, or not.
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Can't help it [笑哭]