Of course, if Facebook and Twitter`s stock reaction is anything to go by after their first quarterly reports, it could spell trouble for Snap Inc when markets open on Thursday the morning after.
The problem is that for these hot tech stocks, excitement and anticipation so high that they deliver results that continue very high growth, and that is baked into their valuations.
Snap for example trades on 17.2 times enterprise-value-to-revenue multiple – a key metric to judge whether a stock is expensive or cheap. Meanwhile, Facebook sits on 9.3 and Twitter is on 4.6 and so are seen as cheaper.
"They need to put in a big revenue growth quarter because you have a valuation here that is very high on an adjusted basis," Neil Campling, head of technology, media and telecoms research at Northern Trust Capital Markets, told CNBC via phone on Tuesday.
Tale of two stocks
Even though Facebook and Twitter both had rough starts with their first earnings report, the story is very different today. Facebook has continued to grow revenues strongly and this has meant its shares are up nearly 300 percent since its initial public offering (IPO). Meanwhile, Twitter has failed to grow revenues while the growth of its users has slowed significantly. Shares of the social media firm are down over 55 percent since going public.
Twitter and Facebook have only ever missed analyst earnings per share estimates on one occasion, according to data from data analytics firm Kensho. But Twitter has missed on user growth and revenue numbers on several occasions. And shares post-earnings reflect that. On average, if you bought shares of Twitter a day ahead of earnings and sold them on the close of the first trading day of the report, you would be down 5.34 percent, Kensho data shows.
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