SNAP's Surge Boosts Social Media Stocks Ahead Of Earnings

Daniel Laboe
·4-min read

Snap Inc. SNAP blew the socks off investors, traders, and analysts alike yesterday evening when it released its outstanding Q3 results. This social media giant illustrated record sales figures that were far beyond what analysts expected amid this unprecedented pandemic. SNAP shares have skyrocketed 32% in today’s trading session bring its year-to-date returns up to 129%.

Facebook FB and Twitter TWTR are ramping in the wake of Snap's success today as the investing world sees how integral digital interactions are in the “new normal.”

I previously thought that Snapchat was just a fad that would undoubtedly be replaced by its mounting competition and its capricious young consumers. This innovation-driven enterprise continues to prove me wrong. This social application continues to come out with cutting-edge "augmented reality" (AR) filters and fresh new features that keep users captivated.

SNAP just surged to new highs for the first time since it went public in March of 2017.

More people are using Snapchat than ever before as the "stay at home" initiative further conditioning society to satisfy its basic social interaction needs digitally. Snap now has 249 million daily active users demonstrating an 18% year-over-year increase. This app has excellent market penetration capturing 90% of American's ages 13 to 24 and 75% of 13 to 34-year-olds in the US. Snap's market share continues to expand internationally, as well. 

Millennials are the largest generation in history and just became the largest consuming generation on Earth today. Millennials were born into a digital world. Computer functionality has advanced astronomically ever since we can remember, and we have grown to rely on technology for almost everything we do. COVID-19's economic shutdowns have accentuated this reliance, and digital social networks have become more vital than ever.

Social networks like Facebook, Twitter, and Snap have all been provided with a massive tailwind in 2020, and you can see this with the gigantic returns that these stocks have illustrated since January 2nd (first day of 2020 trading).

Upcoming Social Network Earnings

Snap's exceptional Q3 results last night created healthy optimism in the social media space as Twitter and Facebook prepare to release their September quarter results. Investors and traders are pricing in strong reports for both these enterprises' upcoming quarterly earnings. FB and TWTR will both be releasing their highly anticipated reports after the market closes on Thursday, October 29th.  

Facebook, the social media king, is up to bat. FB's 37% share price growth will be put to the test when its quarterly results are released after the bell next Thursday. According to Zacks Consensus estimates, the Street expects FB to report an EPS of $1.93 on sales of $19.8 billion, which would represent a year-over-year EPS decline of 9%, but a 12% revenue increase. The future of this social media pioneer remains bright. 

Twitter will also be releasing its earnings next Thursday. Despite the stock's over 56% appreciation this year, analysts expect to see a top and bottom-line decline as advertising spending decelerates during this economic recession. According to Zacks Consensus estimates, the Street expects TWTR to produce an EPS of $0.04 on sales of $764 million, which would demonstrate a year-over-year decline of 76% and 7%, respectively.

Investors are looking beyond 2020 to price TWTR, with analysts estimating accelerating growth figures on both the top and bottom-line in the years to come. Forward guidance is going to be the crucial component for a material price action.

Final Thoughts

These three social media giants are here to stay, and the pandemic has only driven their necessity in 2020's isolated society. The social network platforms that will remain at the top of the app store are the ones that create the innovative-curve, not the ones that follow it. Look for the latest and greatest organic advancements from these platforms and consolidation, which I expect will be rampant in the social media space over the next decade.

 


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