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SNAP Gearing Up to Report Q1 Earnings: What's in the Cards?

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Snap (SNAP - Free Report) is set to report first-quarter 2021 results on Apr 22.

The Zacks Consensus Estimate for revenues is currently pegged at $739.5 million, indicating 59.9% growth from the year-ago reported figure.

In the last reported quarter, its subscriber growth — reflected by Daily Active Users (DAUs) — increased 347 million on a year-over-year basis and 16 million sequentially. DAUs at the end of the fourth-quarter 2020 were 265 million.

The Zacks Consensus Estimate for global DAUs is currently pegged at 275 million, indicating growth of 20.1% from the year-ago quarter.

Meanwhile, the consensus mark for the bottom line has remained steady at a loss of 6 cents per share in the past 30 days, which indicates an improvement from loss of 21 cents reported in the year-ago quarter.

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 Likely to Influence Q1 Results

Snap has been benefiting from a spike in the usage of Snapchat platform. 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.

Moreover, Snap launched the Friend Check Up feature for Snapchat platform in the to-be- reported quarter. Friend Check Up will serve to remind Snapchatters that over time they may have added someone to their friends list who they may no longer want to be in touch with on Snapchat. With a quick, private, convenient process, Friend Check Up enables Snapchatters to clean up their lists and comfortably remove those who don’t need to be there or may have been mistakenly added.

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 (FB - Free Report) , Instagram and Twitter (TWTR - Free Report) among this demography.

In the to-be-reported quarter, Snap released a report in partnership with Oxford Economics that looks at the role of Gen Z in driving post-pandemic recovery and digital economy across six markets — Australia, France, Germany, the Netherlands, the United Kingdom and the United States. Per the report, Gen Z is expected to become a dominant force in the workplace with the number in work across the six markets trebling to 87 million by 2030. Moreover, they are expected to support $3.1 trillion of consumer spending in these markets in 2030.

The Zacks Consensus Estimate for first-quarter ARPU is pegged at $2.69, suggesting an increase of 33.1% from the year-ago reported figure.

However, a recovering but weak ad-spending environment attributed to coronavirus pandemic is expected to reflect on Snap’s first-quarter top-line growth. Moreover, a persistent decline in price per ad impression is likely to have hurt advertising revenues.

Advertising has been the only source of revenues for Snap, which has been facing significant competition from the likes of Twitter, Facebook, Google and Pinterest for ad dollars.

The Zacks Rank #3 (Hold) company’s partnership with cross-platform game engine, Unity Software (U - Free Report) to extend the reach of Unity’s Ad supply to Snapchat advertisers is expected to have attracted ad revenues in the to-be-reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Developments in Q1

On Mar 17, Snap announced the acquisition of Berlin-based start-up Fit Analytics, which counts more than 18,000 retailers and brands as users of its solutions. The financial terms of the deal were not disclosed. Fit Analytics’ technology lets people enter their measurements into a tool that uses machine learning to match those dimensions up to clothes or shoes and find the best fit.

On Jan 26, Snap announced the acquisition of Ariel AI, an augmented reality-focused British artificial intelligence start-up.

On Jan 11, Snap announced the buyout of StreetCred, a New York City-based location data start-up.

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Snap Inc. (SNAP) - free report >>

Unity Software Inc. (U) - free report >>