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Meta shares still offers more value than Snapchat after its decline


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With the SNAP share price having declined excessively this year, we take a quick look at how the company stacks up against peers Meta (Facebook), Twitter Inc. and Pinterest.

MetaSource: Bloomberg
 
 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Monday 30 May 2022 

SNAP share price

Last week saw a dramatic fall in the share price of Snapchat holding company, SNAP Inc.

While the US technology sector has been under pressure, the near-term SNAP price fall found its impetus from a revised trading update released by the business.

While the group had previously forecast revenue growth for the upcoming quarter of 20% to 25% annualised, and Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) up to $50million, the group now expects results to miss these forecasts on the back of a ‘deteriorating’ economy.

With the SNAP share price having declined excessively this year, we take a quick look at how the company stacks up against peers Meta (Facebook), Twitter Inc. and Pinterest.

Performance

Share performanceSource: IG

 

In terms of a one month, three month and year-to-date total return, SNAP has been the worst performing share amongst its peers listed here. Twitter, while still negative year-to-date (-7.06%) is the outperformer.

We have, however, seen a sharp post-earnings gain in the Meta share price, making it the strongest performer in terms of total returns over the last month.

Fundamentals

FundamentalsSource: IG

 

While SNAP has been the worst performer year-to-date, it still carries the most expensive valuation in terms of a forward price to earnings multiple (45.74). The company also has the highest level of debt as a percentage of equity (relative to its peers) and the weakest operating margins.

Meta is the most conservatively priced on a price-to-earnings (P/E) valuation, with the best operating margins amongst the peers listed and very low levels of debt relative to equity.

Broker ratings and price targets

Broker ratings and price targetsSource: Refinitiv and IG as of 30 May 2022

 

The recent share price decline does, however, see SNAP trading at the broadest discount to a consensus of 42 brokers' long-term price targets on the company.

Meta currently trades at the second largest discount to its long-term consensus of price targets from 58 brokers / analysts. SNAP and Meta both currently carry consensus 'buy' ratings while Twitter and Pinterest carry consensus ratings of 'hold'.

SNAP Inc. – technical analysis

Snapchat chartSource: ProRealTime

 

The share price of SNAP remains in a long-term downtrend. There is, however, a short-term suggestion that the share is oversold at current levels. Should a rebound from oversold territory manifest, it would be considered a short-term correction of a longer term downtrend.

Traders respecting the longer term downtrend might look for short entry in the event of a rebound from oversold territory. Only on a move back above dotted trendline resistance on our chart would we reassess the merits of a long bias to trades on the stock once again.

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