Personal Finance

Snap Stock Has a Lot to Prove on Thursday

A woman walking past a Snapchat billboard.

If Snap, Inc. (NYSE: SNAP) wants to win back the brief success it had on Wall Street, it's going to have the perfect chance to do so when it reports fresh financials this week. Snapchat's parent company reports second-quarter results on Thursday, and it's gotten itself into a pretty big hole.

Snap stock initially soared after going public at $17 in early March, only to peak on its second day of trading. It's a busted IPO these days. Analysts and investors alike have bailed on the short-lived market darling, and that even includes its largest lead underwriter . The stock has moved higher in just one of the past 10 weeks. Its best shot to turn that negative sentiment around will come in the form of a blowout quarter, and that brings us to Snap's earnings announcement, which is due shortly after Thursday's market close.

A woman walking past a Snapchat billboard.

Image source: Snap, Inc.

Snap is still growing

Analysts are holding out for heady growth in this week's report. They see revenue soaring 164% to hit $189.2 million. Wall Street's also bracing for more red ink, this time in the form of a $0.14 a share quarterly deficit.

It may seem odd to find a company whose revenue is more than doubling be out of favor, especially with Facebook (NASDAQ: FB) -- the dot-com darling often portrayed as eating Snap's lunch -- posting year-over-year top-line growth of just 45% during the same three months. However, given Snap's lack of profitability and lofty valuation out of the gate, it's easy to see why the stock is vulnerable in a time when Facebook is thriving. Fears of last month's lock-up expiration and its disappointing first quarterly report as a public company three months ago obviously aren't helping.

Bulls hungry for glimmers of optimism may have found it on Monday when Deutsche Bank analyst Lloyd Walmsley put out an encouraging note. He sees Snap's user engagement and product innovation helping the stock bounce back during the latter half of this year. His checks show healthy ad growth as brand advertisers are drawn to Snap's attractive view rates. He also plays up the potential of Snap as a buyout candidate. Walmsley did lower his price target from $23 to $20, but at current levels, that's still a hearty 49% of upside.

Thursday's report will naturally either validate Walmsley's view or confirm the stock's bearish momentum. The timing of the bullish nod -- just three days before the actual report -- is comforting, but now it's time for Snap to live up to its end of the bargain.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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