SNAP – Market expectations are for Uniform ROA to improve, but management may have concerns about growth, marketing, product, and iOS platform changes

April 1, 2022

  • Snap Inc. (SNAP) currently trades above corporate and near historical averages relative to Uniform earnings, with a 56.6x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to improve to 39%, accompanied by 12% Uniform asset growth.

  • However, analysts expect Uniform ROA to decline to 30% in 2023, accompanied by 90% Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $230, representing significant potential equity upside for the firm. That said, it is unlikely the firm could sustain early-stage growth rates indefinitely.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about growth, advertising and marketing, initiatives, product, and iOS platform changes.

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