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Snap (SNAP) Q3 Earnings: Is Disappointment in the Cards?
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Snap Inc. (SNAP - Free Report) ) is set to report third-quarter 2018 results on Oct 25.
The company beat the Zacks Consensus Estimate in two of the trailing four quarters, delivering an average positive surprise of 7.8%
In the last reported quarter, the company's loss of 14 cents per share was narrower than the Zacks Consensus Estimate of 17 cents and the year-ago quarter’s loss of 16 cents.
Revenues surged 44.4% year over year to $262.3 million and outpaced the Zacks Consensus Estimate of $250 million. The year-over-year growth was primarily driven by an increase in advertising revenues, which jumped 48%, along with strong growth in international countries. Moreover, Snap also witnessed an improvement in the new user retention rate.
For the third quarter, Snap expects revenues between $265 million and $290 million, indicating growth of 27-39%. Adjusted EBITDA loss is expected to be between $160 million and $185 million. Notably, the company incurred loss of $179 million in the year-ago quarter.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $283.5 million, which indicates year-over-year growth of 36.4%. Moreover, the consensus estimate for the bottom line has been steady at loss of 14 cents per share over the past seven days.
Let’s see how things are shaping up for the upcoming announcement.
Lackluster user growth remains the primary concern for investors primarily due to intensifying competition from Instagram. The company’s focus on the younger demographic poses a lot of challenges. Snap undoubtedly is quite popular among that demography but its failure to attract the older generation (above 34 year olds) has been a negative.
Notably, the company’s daily active users (DAU) decreased nearly 3 million sequentially to 188 million in second-quarter 2018. North America DAU was 80 million, down 1.2% sequentially.
Management stated that the sequential decline was due to lower usage of the Snapchat application, primarily due to the redesign. The decline is a concern as it makes the platform less attractive to advertisers.
Advertising forms the mainstay of Snap’s revenues. Although the company’s shift to an automated or programmatic ad delivery system has increased the number of advertisers on the platform, it has resulted in lower ad prices, which is impacting its results.
Nevertheless, Snap is leaving no stone unturned to turn around its fortunes. The company has been focusing on new features like Group Video Chat (that allows users to video chat with up to 16 friends at a time) and Lens Explorer.
Moreover, the company launched Snappables, new Lenses for sharing augmented reality (AR) experiences with one or multiple friends. Users can control Snappables using touch, motion, and facial expressions.
Snap Kit was launched during the second quarter to help developers build products. The company also inked partnerships with Pandora and Tinder to share features on the platforms.
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.
Snap has a Zacks Rank #3 and an Earnings ESP of -1.99%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some companies, which, per our model, have the right combination of elements to post earnings beat this quarter:
HubSpot, Inc. (HUBS - Free Report) has an Earnings ESP of +57.58% and a Zacks Rank #2.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Snap (SNAP) Q3 Earnings: Is Disappointment in the Cards?
Snap Inc. (SNAP - Free Report) ) is set to report third-quarter 2018 results on Oct 25.
The company beat the Zacks Consensus Estimate in two of the trailing four quarters, delivering an average positive surprise of 7.8%
In the last reported quarter, the company's loss of 14 cents per share was narrower than the Zacks Consensus Estimate of 17 cents and the year-ago quarter’s loss of 16 cents.
Revenues surged 44.4% year over year to $262.3 million and outpaced the Zacks Consensus Estimate of $250 million. The year-over-year growth was primarily driven by an increase in advertising revenues, which jumped 48%, along with strong growth in international countries. Moreover, Snap also witnessed an improvement in the new user retention rate.
For the third quarter, Snap expects revenues between $265 million and $290 million, indicating growth of 27-39%. Adjusted EBITDA loss is expected to be between $160 million and $185 million. Notably, the company incurred loss of $179 million in the year-ago quarter.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $283.5 million, which indicates year-over-year growth of 36.4%. Moreover, the consensus estimate for the bottom line has been steady at loss of 14 cents per share over the past seven days.
Let’s see how things are shaping up for the upcoming announcement.
Snap Inc. Price and Consensus
Snap Inc. Price and Consensus | Snap Inc. Quote
Factors Likely to Influence Q3 Results
Lackluster user growth remains the primary concern for investors primarily due to intensifying competition from Instagram. The company’s focus on the younger demographic poses a lot of challenges. Snap undoubtedly is quite popular among that demography but its failure to attract the older generation (above 34 year olds) has been a negative.
Notably, the company’s daily active users (DAU) decreased nearly 3 million sequentially to 188 million in second-quarter 2018. North America DAU was 80 million, down 1.2% sequentially.
Management stated that the sequential decline was due to lower usage of the Snapchat application, primarily due to the redesign. The decline is a concern as it makes the platform less attractive to advertisers.
Advertising forms the mainstay of Snap’s revenues. Although the company’s shift to an automated or programmatic ad delivery system has increased the number of advertisers on the platform, it has resulted in lower ad prices, which is impacting its results.
Nevertheless, Snap is leaving no stone unturned to turn around its fortunes. The company has been focusing on new features like Group Video Chat (that allows users to video chat with up to 16 friends at a time) and Lens Explorer.
Moreover, the company launched Snappables, new Lenses for sharing augmented reality (AR) experiences with one or multiple friends. Users can control Snappables using touch, motion, and facial expressions.
Snap Kit was launched during the second quarter to help developers build products. The company also inked partnerships with Pandora and Tinder to share features on the platforms.
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.
Snap has a Zacks Rank #3 and an Earnings ESP of -1.99%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some companies, which, per our model, have the right combination of elements to post earnings beat this quarter:
Apple (AAPL - Free Report) has an Earnings ESP of +1.59% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
HubSpot, Inc. (HUBS - Free Report) has an Earnings ESP of +57.58% and a Zacks Rank #2.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>