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Snap (SNAP) to Report Q1 Earnings: Disappointment in Cards?
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Snap Inc. (SNAP - Free Report) is set to report first-quarter 2018 results on May 1. The company has a mixed record of earning surprises in recent quarters. It beat the Zacks Consensus Estimate twice and matched it once in the trailing four quarters, delivering an average positive surprise of 2.03%.
Last quarter, the company reported loss per share of 13 cents, which was narrower than the Zacks Consensus Estimate of a loss of 15 cents and the year-ago quarter’s loss of 19 cents.
The company reported revenues of $285.7 million, which came ahead of the consensus mark of $251.7 million. Revenues grew 72.4% year over year in the fourth quarter, reversing the decelerating growth trend in the last reported quarters. In the first, second and third quarters of 2017, the company’s revenues had registered 286%, 153% and 62% year-over-year increase, respectively.
For the first quarter of 2018, the Zacks Consensus Estimate for Snap’s total revenues is pegged at $247 million, indicating an increase of 64.7% from the year-ago period. However, the projected increase is lower than the growth rate witnessed in the last reported quarter.
The Zacks Consensus Estimate for loss per share stands at 17 cents, narrower than a loss of 20 cents reported in the year-ago quarter but wider than a loss of 13 cents in fourth quarter.
Although the growing popularity of Snap’s messaging application among teenagers is a positive, the quarter witnessed investors’ anxiety over a number of reasons, with redesign taking center stage. The redesign of the Snapchat app has garnered significant negative response and there has been growing tension among investors as to whether it would have an adverse impact on the company’s ad business.
This is mainly due to the fact that Snap operates in an environment where competition for ad revenues is highly intense. Advertisers are more likely to opt for other platforms such as Alphabet (GOOGL - Free Report) , Facebook and Twitter as the total addressable market (TAM) of these companies is much bigger than Snapchat.
Moreover, Snapchat is losing market share to Facebook-owned Instagram, which put up a superb show this quarter. Per Sensor Tower, Instagram downloads continue to surpass Snapchat in the global market, with the gap growing in the first quarter.
Furthermore, Snap’s outstanding result in the last quarter was due to robust ad spending by large brands during the holiday season, which is however expected to remain muted this season. Per a latest survey by Digiday, 42% of the respondents said that Snapchat was the most difficult platform for digital advertisements. Therefore, Snap with its limited reach is likely to bear the brunt.
Snap seems to be more focused on improving profitability, which is evident from the back to back layoff of workers. We believe further cost cutting without any significant rise in the top line may not be enough to boost profitability.
Snap has also been trying to combat all odds by introducing tools and features to boost engagement and user growth, which is expected to drive growth in the soon-to-be reported quarter. Nonetheless, we anticipate the rate of growth to decline, continuing the trend of the first three quarters of 2017.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our our Earnings ESP Filter.
Snap has a Zacks Rank #3 and its Earnings ESP is -7.78%. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.
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Image: Bigstock
Snap (SNAP) to Report Q1 Earnings: Disappointment in Cards?
Snap Inc. (SNAP - Free Report) is set to report first-quarter 2018 results on May 1. The company has a mixed record of earning surprises in recent quarters. It beat the Zacks Consensus Estimate twice and matched it once in the trailing four quarters, delivering an average positive surprise of 2.03%.
Last quarter, the company reported loss per share of 13 cents, which was narrower than the Zacks Consensus Estimate of a loss of 15 cents and the year-ago quarter’s loss of 19 cents.
The company reported revenues of $285.7 million, which came ahead of the consensus mark of $251.7 million. Revenues grew 72.4% year over year in the fourth quarter, reversing the decelerating growth trend in the last reported quarters. In the first, second and third quarters of 2017, the company’s revenues had registered 286%, 153% and 62% year-over-year increase, respectively.
For the first quarter of 2018, the Zacks Consensus Estimate for Snap’s total revenues is pegged at $247 million, indicating an increase of 64.7% from the year-ago period. However, the projected increase is lower than the growth rate witnessed in the last reported quarter.
The Zacks Consensus Estimate for loss per share stands at 17 cents, narrower than a loss of 20 cents reported in the year-ago quarter but wider than a loss of 13 cents in fourth quarter.
Snap Inc. Price and EPS Surprise
Snap Inc. Price and EPS Surprise | Snap Inc. Quote
Things to Watch Out for This Time
Although the growing popularity of Snap’s messaging application among teenagers is a positive, the quarter witnessed investors’ anxiety over a number of reasons, with redesign taking center stage. The redesign of the Snapchat app has garnered significant negative response and there has been growing tension among investors as to whether it would have an adverse impact on the company’s ad business.
This is mainly due to the fact that Snap operates in an environment where competition for ad revenues is highly intense. Advertisers are more likely to opt for other platforms such as Alphabet (GOOGL - Free Report) , Facebook and Twitter as the total addressable market (TAM) of these companies is much bigger than Snapchat.
Moreover, Snapchat is losing market share to Facebook-owned Instagram, which put up a superb show this quarter. Per Sensor Tower, Instagram downloads continue to surpass Snapchat in the global market, with the gap growing in the first quarter.
Furthermore, Snap’s outstanding result in the last quarter was due to robust ad spending by large brands during the holiday season, which is however expected to remain muted this season. Per a latest survey by Digiday, 42% of the respondents said that Snapchat was the most difficult platform for digital advertisements. Therefore, Snap with its limited reach is likely to bear the brunt.
Snap seems to be more focused on improving profitability, which is evident from the back to back layoff of workers. We believe further cost cutting without any significant rise in the top line may not be enough to boost profitability.
Snap has also been trying to combat all odds by introducing tools and features to boost engagement and user growth, which is expected to drive growth in the soon-to-be reported quarter. Nonetheless, we anticipate the rate of growth to decline, continuing the trend of the first three quarters of 2017.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our our Earnings ESP Filter.
Snap has a Zacks Rank #3 and its Earnings ESP is -7.78%. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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