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SNAP Gearing Up to Report Q3 Earnings: What's in the Cards?

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Snap (SNAP - Free Report) is set to report third-quarter 2020 results on Oct 20.

The Zacks Consensus Estimate for revenues is currently pegged at $547.2 million, indicating 22.6% growth from the year-ago reported figure.

In the last reported quarter, its subscriber growth — reflected by Daily Active Users (DAUs) — increased 35 million on a year-over-year basis and 9 million sequentially.

Snap expects DAU between 242 million and 244 million for the third quarter of 2020, implying year-over-year growth of 15-16% or 32-34 million daily active users. The Zacks Consensus Estimate for global DAUs is currently pegged at 243 million.

Meanwhile, the consensus mark for loss has remained steady at 19 cents per share in the past 30 days.

Let’s see how things have shaped up for the upcoming announcement.

Snap Inc. Price and EPS Surprise

Snap Inc. Price and EPS Surprise

Snap Inc. price-eps-surprise | Snap Inc. Quote

Factors to Influence Q3 Results

Snap has been benefiting from a spike in the usage of Snapchat. The company has been focused on continuously adding a set of innovative features like Lens Studio 2.0, Camera Kit, Snap Minis and Bitmoji for Games, which is making Snapchat more attractive for users and advertisers.

In addition to strong adoption of AR Lenses, Discover content and Shows are expected to have driven user growth amid coronavirus-led social distancing guidelines.

The growing adoption of Snapchat among Gen Z (13-24 years) is expected to have driven DAUs. Markedly, it is a larger platform than Facebook , Instagram and Twitter among this demography.

The Zacks Consensus Estimate for third-quarter ARPU is pegged at $2.27, suggesting an increase of 7.1% from the year-ago reported figure.

However, bleak ad-spending environment due to the pandemic is expected to have negatively impacted Snap’s third-quarter top-line growth.

Advertising has been the only source of revenues for this Zacks Rank #3 (Hold) company, which has been facing significant competition from the likes of Twitter, Facebook, Google and Pinterest (PINS - Free Report) for ad dollars. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, a persistent decline in price per ad impression is likely to have hurt advertising revenues.

Further, higher spending on content, sales and marketing may have been a few lingering overhangs on profitability. Total costs (including cost of revenues and operating expense) are expected to grow at percentage rates in low to mid 20s year over year.

Hence, Snap’s third-quarter bottom-line results are expected to reflect the negative impact of rising expenses.

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