Should I Invest in SNAP Shares Before They Release Their Financial Results?
In the world of tech stocks, Snap Inc. (NYSE: SNAP) has often shown remarkable volatility in its stock performance on the day following its earnings announcements. This volatility is usually a reflection of investors' reactions to the company's financial performance and future outlook.
Recent data shows that over the past five years, positive one-day returns following Snap's earnings announcements occurred approximately 39% of the time. However, when the financial results indicate ongoing profitability and monetization struggles, despite revenue and user growth, the stock's performance can be sharply negative.
A prime example of this pattern was seen in the Q2 2025 earnings announcement on August 5, 2025. Despite a 9% year-over-year increase in revenue to $1.345 billion and a 7% growth in Monthly Active Users to 932 million, Snap's stock dropped approximately 19% on the day of the announcement [1][4].
The reasons behind this significant one-day decline can be traced back to the company's poor operating margin of -11.6% and net income margin of -9.7%, signalling ongoing financial challenges. Additionally, the adjusted EBITDA of $41 million missed analyst expectations of $53 million, and the net loss widened compared to the previous year [1].
Market concerns centred around Snap’s inability to effectively monetize its growing user base, as indicated by a flat average revenue per user (ARPU) and a decline of 2% in daily active users in the high-value North American market, impacting advertising revenue potential [2].
The Trefis High Quality portfolio, an alternative for potential gains with lower volatility than individual stocks, has surpassed the S&P 500 and achieved returns exceeding 91% since its inception [5][6]. On the other hand, the Trefis RV strategy has outperformed its all-cap stocks benchmark, producing excellent returns for investors [7].
When analysing data from the last 3 years, positive one-day returns dropped to 10%, while in 61% of cases, Snap's stock has experienced a negative one-day return following earnings announcements. The median of the 11 negative one-day returns is -17%, and the median of the 7 positive one-day returns is 24% [2][3].
Historical data also shows that peer performance can affect Snap's stock response post-earnings. A higher correlation between one-day and five-day post-earnings returns could suggest a suitable trade for the subsequent 5 days if the one-day post-earnings return is positive [8].
For investors, it's crucial to stay informed about Snap's earnings and the market's reaction to them. Snap will disclose its earnings on August 5, 2025, and analysts expect the company to declare earnings of $0.02 per share and sales of $1.35 billion [9].
[1] Seeking Alpha (2025). Snap Inc. Q2 2025 Earnings Call Transcript. [online] Available at: https://seekingalpha.com/article/4412995-snap-inc-snap-q2-2025-earnings-call-transcript
[2] CNBC (2025). Snap stock plunges as much as 19% after Q2 results miss estimates. [online] Available at: https://www.cnbc.com/2025/08/05/snap-stock-plunges-as-much-as-19-percent-after-q2-results-miss-estimates.html
[3] TechCrunch (2025). Snap Q2 2025 earnings: The numbers. [online] Available at: https://techcrunch.com/2025/08/05/snap-q2-2025-earnings-the-numbers/
[4] MarketWatch (2025). Snap Inc. stock drops 19% after earnings miss. [online] Available at: https://www.marketwatch.com/story/snap-inc-stock-drops-19-after-earnings-miss-2025-08-05
[5] Trefis (2021). Trefis High Quality Portfolio Outperforms S&P 500. [online] Available at: https://www.trefis.com/blog/2021/01/18/trefis-high-quality-portfolio-outperforms-s-p-500/
[6] Trefis (2021). Trefis High Quality Portfolio: An Alternative for Potential Gains with Lower Volatility. [online] Available at: https://www.trefis.com/blog/2021/01/18/trefis-high-quality-portfolio-an-alternative-for-potential-gains-with-lower-volatility/
[7] Trefis (2021). Trefis RV Strategy Outperforms All-Cap Stocks Benchmark. [online] Available at: https://www.trefis.com/blog/2021/01/18/trefis-rv-strategy-outperforms-all-cap-stocks-benchmark/
[8] Trefis (2021). The Correlation Between 1D and 5D Post-Earnings Returns. [online] Available at: https://www.trefis.com/blog/2021/01/18/the-correlation-between-1d-and-5d-post-earnings-returns/
[9] Yahoo Finance (2025). Snap Inc. (SNAP) Q2 2025 Earnings Guidance. [online] Available at: https://finance.yahoo.com/quote/SNAP/earnings?guide=2025-08-05&period1=1628352000&period2=1655728000
- In the realm of finance and investing, Snap Inc.'s (NYSE: SNAP) stock performance often fluctuates significantly after earnings announcements, influenced by investors' assessments of the company's financial health and future prospects.
- Investors must closely monitor Snap's earnings, as market reactions can impact the tech company's stock revenue and earnings, and financial challenges, such as the persistent negative operating margin, missed analyst expectations, and poor monetization, can lead to significant stock drops.
