Snap Stock Forming Base Ahead Of Earnings; Should You Buy This IBD 50 Leader?

Among leading growth stocks, our pick for today’s IBD 50 Stocks To Watch is Snap stock, which is forming a new cup base ahead of its earnings next week. Snap (SNAP) had a meteoric rise in 2020, gaining 203% for the year.




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Then, earlier this year, Snap stock jumped to a record high after reporting fourth-quarter earnings that beat estimates on Feb. 4.

The stock features a very strong IBD Composite Rating of 95, alongside a Relative Strength Rating of 95. The internet content growth company is currently ranked sixth among companies in its industry group in terms of Composite Rating.

Snap Stock: Earnings Preview

Snap stock’s recent earnings have shown strong growth in both its top and bottom lines.

Year-over-year earnings growth also accelerated at Snap, the parent of social media platform Snapchat. The firm posted EPS growth of 125% and 200% in the most recent quarters. Meanwhile, sales growth went from 52% to 62% over the past two quarters. Both the company’s top and bottom line growth exceeds the minimum of 25% CAN SLIM looks for in top stocks.

Earnings of 9 cents a share for the fourth quarter exceeded analysts’ consensus estimate. Additionally, the Santa Monica, Calif.-based company said revenue reached $911 million for the quarter, also beating expectations.

“As we look towards the future, we’re excited to build on our investments in augmented reality, mapping, and content to drive our ongoing growth,” Snap Chief Executive Evan Spiegel said in remarks to analysts after the earnings report.

As for the company’s upcoming earnings, which are due April 22 after the market closes, analysts expect Snap to report a loss in company’s bottom line of an adjusted 21 cents a share. However, revenue is expected to climb 60% to $741 million.

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The Q1 forecast for revenue went up from the $703.1 million consensus analyst estimates to between $720 million to $740 million, according to IBD data.

In the most recent quarter, Snap showed daily active user growth of 22% year-over-year to 265 million. The jump was boosted by successful new products developed in recent quarters, such as Snap Games, a live multiplayer gaming platform, new augmented-reality features, as well as new mapping features.

Growth Stocks Nearing Buy Points

Shares of this IBD 50 growth stock have had a strong 2021 so far, rising more than 29%. Snap stock is forming a new cup base with a 73.69 buy point. While MarketSmith pattern recognition identifies the pattern as a cup base, it also can be interpreted to be a double bottom with a 65.23 buy point. But as a double bottom, the pattern is lopsided.

Snap stock reclaimed support at its 50-day moving average last week. Shares dipped below this area when forming the current base. The stock’s relative strength line has also been trending higher in recent days after a period of drifting sideways. Ideally, the RS line — which compares a stock’s performance with that of the S&P 500 — will be at or near new highs as the stock breaks out.

Snap stock’s Relative Strength Rating of 95 meets the minimum requirement of 80 for growth stocks breaking out.

Follow Fox on Twitter at @foxonstocks for more analysis other growth stocks.

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View more information: https://www.investors.com/research/snap-stock-to-watch-snap-stock-forming-base-ahead-of-earnings/

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