SNAP Earnings Preview: Recent Insider Selling vs Recent Analyst Upgrades

SNAP earnings are being released on Apr 21st, 2022 with an estimate of -0.17 EPS. They are reporting earnings after market close. Based on historical trends SNAP has a 57.14% chance of beating earnings. This should be viewed with the associated guidance set out by the company and what analysts think about the potential for SNAP to beat earnings. I also took a look at analyst ratings and recent insider buying and selling, which tells a bit of a different story, so I'm leaning towards a miss for SNAP Deutsche Bank upgrades SNAP to buy Deutsche Bank just released their rating for SNAP. As of Mar 10th, 2022 Deutsche Bank rates SNAP as a buy, compared to their previous rating of hold for SNAP. Here is the current analyst rating distribution for SNAP. In total there are 27 SNAP analyst ratings. 25 Buys 2 Holds 0 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine a SNAP stock forecast. However, this shouldn't be the only factor when determining whether to invest in Snap Inc., I would use Analyst Ratings as a datapoint along with other fundamental indicators and investment metrics. SNAP Insider Trades - SEC Form 4 Filings (April 21, 2022) Morrow Rebecca, who is an officer: CAO, and Controller of SNAP disposed 8,405 shares at a price of $32.25 per share. Andersen Derek, who is an officer: Chief Financial Officer of SNAP disposed 8,789 shares at a price of $32.26 per share. Gorman Jeremi, who is an officer: Chief Business Officer of SNAP disposed 6,128 shares at a price of $32.37 per share. This is recent selling by the management of SNAP - the number of shares isn't huge but the timing is interesting with earning being released later today If you're not familiar with SEC Form 4 filings, Form 4 is required to be filed by a company or the individual at the company when there is a change in the holdings of company insiders. Form 4 must be filed with the SEC within two days of the transaction. The buying or selling of the shares is often referred to as insider buying or selling. The reason this is a big deal is insiders have a real understanding of the internal goings-on inside the company, and they may have information that would allow them to take advantage of that information for their own profit. SNAP Insider Buying Insights Let's take a close look at this recent filing to see if there are any useful insights. Fundamentals of Tracking Insider Buying: Size of Trade - the size of the trade is important. The dollar value of a buyer can be very significant. If Bill Gates buys a few shares not that big of a deal, but if the regional vice president spends a year's salary on purchasing shares pay attention! Morrow Rebecca disposed shares with total value of $271.1k. Type of Trade - the type of transaction is important; buying is far more significant than selling shares. The sales of shares indicate a cash flow issue for the seller; they need cash for a large transaction, and liquidating their shares is easier than taking out a loan. Number of Insiders - pay attention to the number of insiders that are buying or selling; the best scenario is finding a situation that includes two or more insiders buying shares in a compressed period. Looking at the most recent SEC Form 4 filings for SNAP we can see that the transaction by Morrow Rebecca is one of many recent transactions by SNAP holders. Price of Trade - the price being paid for the transaction is important, as you would expect that insiders would buy when the price was low and sell when the price was high. Pay attention to when the transactions occurred and at what price it was sold; if the price is significantly different from the current price, then wait for more insider buying to confirm the behavior. SNAP has a 52 week high of $83.34 and a 52 week low of $24.32 which means that the disposal is taking place near the 52 week low at $32.25 per share. Timing of Trade - Insiders tend to be early in their transactions, especially when it comes to buying shares. Looking at the timing of insider trading at SNAP and the recent price of the trade, we can assume that insiders see this as an opportunity to cash out near the 52-week high SNAP Earnings - Likely a Miss The insider selling timing is somewhat concerning, even if the number of shares sold isn't huge. I also think it's interesting that a few analysts have upgraded their view of SNAP to a Buy in the recent months, maybe due to the current price being near the52 week low. From a macro perspective, we have seen sure growth across platforms fall substantially over the last few months, and I think SNAP will run into the same issues.