New Trade for July 12th, 2021

Trading action was mixed to start the day.  The Dow pulled back from Friday’s record close as stocks tied to the economic recovery slipped.  Tech shares traded higher, giving the Nasdaq a boost in early trading.  Will today bring another record breaking session?  We’ll have to wait and see. 

Earnings season officially begins this week with big banks reporting tomorrow.  Expectations are high as profits roared in the second quarter relative to the early days of the pandemic last year.  

“With earnings season kicking off next week, the bar is set quite high and corporate America better produce another stellar quarter or there could be some disappointed bulls,” said Ryan Detrick, chief market strategist at LPL Financial, after Friday’s record high.

There has been a lot of speculation lately around growth vs. value for the second half of the year.  Our team is monitoring great stocks from both sides of the tracks and looking forward to sharing info on those with you in the coming days.  Today we’re covering a tech firm with major potential for upside in the near and mid term.  And one to consider ahead of their upcoming Q2 call.   

Snap Inc. (SNAP)  has boasted that it reaches “more than 90% of 13 to 24 year olds and more than 75% of 13 to 34 year olds.”  All the while, the company’s beefed-up portfolio of offerings has attracted advertisers as more people ignore traditional banner ads.  

The company reported that its daily active users were up 22% to 280 million in the first quarter.  The ability to reach this “unduplicated and hard-to-reach audience” has attracted Wall Street’s attention as it continues to add users and monetize its ever growing platform as Facebook and other giants face scrutiny.

SNAP has climbed 170% in the past year, but it fell victim to the growth selling that began in February.  Thankfully, it has made a big comeback, up nearly 30% since mid-may.  

In Q1 2021, revenue increased 66% to $770 million from year-ago levels, outpacing the 46% revenue increase in fiscal 2020 compared with the previous year.  Snap’s revenue also exceeded the 43% increase in operating expenses for Q1.  Snap also reported its first positive free cash flow figure, generating $126 million in free cash flow in the first quarter.  With an interest expense for the quarter of only $5 million and liquidity of just under $1.6 billion.

The company is slated to report Q2 earnings on July 22nd after the bell and forecasts revenue between $820 million and $840 million for the quarter. That means revenue should come in at least 81% higher compared to Q2 2020.

The 30 analysts offering a 12-month price forecast for SNAP have a median target of $80 which represents a 21.5% increase from its current price.  The current consensus among 38 polled investment analysts is to buy SNAP stock.  There are 28 Buy recommendations, 9 recommendations to Hold and only 1 Sell recommendation for the stock. 

Investors with long-term outlooks might want to buy Snap now, given its ability to evolve its modern media platform while attracting a vital demographic in the new age of entertainment.  

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