I was excited about playing the momentum for this stock last earnings season when I released the PDF at about $14 a share and it popped to $17 a share about a week after we published.
I felt confident on the probabilities of a big earnings beat because the company had released new filters that pushed it’s downloads to new highs. They also had announced beta-testing for Audience Network, a way to monetize the 190 million users outside of the Snapchat application.
Funds and institutions will pile in for Audience Network because of what it did for Facebook. However, Audience Network hasn’t opened beyond beta-testing and there hasn’t been an update since April, when the company stated it would be released in the “coming months.”
If/when this does happen, Snap will report higher revenue but I don’t see any evidence that we’re there yet. I also haven’t seen any new filters that would suggest new app downloads or viral popularity (even if short-lived, these are great for momentum plays). We now see Snap testing dynamic ads, which are popular on Instagram. These will not have an effect on earnings this quarter.
TikTok is a looming threat to social media apps, as well. However, if/when I hear anything about Audience Network officially launching, I will be an immediate buyer.
For this earnings report, I am on the sidelines for Snap. I like more confirmation from app download reports than what I’m getting right now.
However, Knox trades more on technicals and he is getting into the trade ahead of earnings. Here is his take on the situation:
SNAP Technicals
By Knox Ridley
After Snap hit my stop at $14, closing the position for nice little gain, I’m getting back into SNAP and here is why:
- 5 waves up (in purple) that hit all the Fibonacci points.
- 3 waves down from the recent high (A,B,C), and the C wave hit the 138.2% extension and is turning back up.
- Just reclaimed the 10-day EMA – a show of changing momentum.
- If we take the length of the uptrend (the bottom of 1- and the peak of 5)and multiply it by the Fibonacci ratios, SNAP turned up right at the 38.2% time marker, which coincides with the MACD turning up, and the Stochastic/RSI turning up.
- We now have 5-waves up on the 3 minute chart when you zoom into the most recent push up. This is a tell of the bigger direction that is unfolding.
I’m going long, but cautious of the overall market, hence I’m placing a stop at $13. If you want to give it more room to breathe, I’d place it just under the .382 retrace level in black.
Here’s the chart:
