If you are a shareholder of Snap Inc. SNAP you are probably wondering why it is getting walloped on Thursday ahead of its fourth-quarter report after the close.
Blame it on its social media peer Meta Platforms Inc. FB, which is lower 23% following its disappointing fourth-quarter report.
The sympathy move in the issue makes it the PreMarket Prep Stock of the Day.
What Is A Sympathy Move? Just as the definition of the word implies, a sympathy move occurs when the stock of a company is impacted by news delivered by another company. For example, other social media companies like Twitter Inc. TWTR and Pinterest PINS are getting pounded in Thursday’s session, as investors fear those issues will post similar results to Meta.
The Negative: On many occasions, the results from the first company in a peer group can be a good indication of how other companies will do moving forward. In addition, the chart on Snap is horrible, as the issue made a new low for the move at $25.40.
This marks the lowest level for the issue since July 2020, when it bottomed at $22.46.
'Potential' Positive For Snap: A familiar term used on the PreMarket Prep Show during earnings season is whether a company in a sector that reports first sets a “high” or “low” bar for the others reporting afterward.
In this instance, Meta has set a really, really low bar for Snap, which will be reporting after the close.
In other words, the negative price action in Thursday’s session may be pricing in a report that will be just as bad as Meta's, if not worse. In the event the report is not as horrible, the stock may actually rally off the report.
This is not an unreasonable assumption, since the two companies do rely a lot on many of the same factors to generate revenues.
PreMarket Prep's Take On Snap: The producer of the show, Spencer Israel, is hands-off on the issue and not taking stock of the low bar being set for Snap to clear.
"The bar is low, but I do not think it really matters," Israel said.
"There is nothing that the company could say that would turn the tide right now.”
Israel cited Apple Inc.'s AAPL privacy policy and supply chain issues for the demise of these issues that rely so heavily on advertising.
Co-host Dennis Dick concurred with Israel, but mentioned if the issue could pull off a surprise, “it may have a relief rally, but that will be it.”
He was astounded the issue was still valued at $45 billion: in his opinion, “it may only be worth a few billion. It is a no-touch for me in the long-term portfolio.”
SNAP Price Action: After a much lower open Thursday ($25.74 vs. $32.07), Snap attempted to rebound but came up well shy of the bottom of Wednesday’s range ($31.73), only reaching $26.49.
Since that making that high it has drifted lower and is trading just above the daily low of $25.40 as of 11:30 a.m. EST.
The full discussion on the issue from Thursday's show can be found here:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
