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Snap (SNAP) Up 34% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Snap (SNAP - Free Report) . Shares have added about 34% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Snap due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Snap reported third-quarter 2023 earnings of 2 cents per share, beating the Zacks Consensus Estimate by 150%. The metric declined 75% year over year.
Revenues increased 5.3% year over year to $1.19 billion, which beat the Zacks Consensus Estimate by 7.55%.
Daily active users (DAU) at the end of the reported quarter were 406 million, up 11.8% year over year. Snap added 43 million DAU on a year-over-year basis.
Geographically, revenues from North America (66.2% of revenues) decreased 3.1% year over year to $786.15 million. Revenues from Europe (16.9%) increased 24.1% to $200.3 million. Rest of the World (ROW) revenues were $202.1 million, up 30% year over year.
The average revenue per user (ARPU) decreased 5.8% year over year to $2.93. On a year-over-year basis, the ARPU of North America decreased 3.8%, while the ARPUs of Europe and ROW increased 15.3% and 7.9%, respectively.
Improvement of User Engagement in the Third Quarter
North America DAU was 101 million, up 1% year over year. Europe DAU was 95 million, up 8% year over year and ROW DAU was 211 million at the end of the reported quarter, up 20.6% year over year.
In the third quarter, Snap added new publisher deals and renewed agreements with ITV in the U.K., ProSieben in Germany, Network 18 in India and ESPN in the Netherlands.
The Snapchat+ subscription service reached more than 5 million paying subscribers in the third quarter. The company made considerable progress in diversifying revenues with Snapchat+, ARES and sponsored AR advertising.
SNAP is broadening its presence in the realm of generative artificial intelligence through the introduction of many AI-integrated features. More than 200 million people have used the company’s AI chatbot.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 19.1% year over year to $555.8 million.
Adjusted operating expenses were $1.01 billion, down 7.7% year over year.
Sales and marketing expenses increased 10% year over year to $297.3 million and general and administrative expenses declined 15.7% year over year to $221.1 million. Research and development expenses contracted 12.4% year over year to $494.6 million.
Adjusted EBITDA was $40.1 million, down 44.8% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2023, cash and cash equivalents and marketable securities were $3.6 billion compared with $3.7 billion as of Jun 30, 2023.
Operating cash flow was $13 million in the third quarter of 2023 compared with $56 million in the year-ago quarter.
Free cash flow was negative $61 million in the third quarter of 2023 compared with $18 million in the year-ago quarter.
Q4 Guidance
Per internal forecast, built on the assumption that DAU will reach 410 million to 412 million, the company expects a revenue range of $1,320 million to $1,375 million, implying year-over-year growth of around 2% to 6%. Within this range of revenue, Snap estimates that adjusted EBITDA will be between $65 million and $105 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted -9.26% due to these changes.
VGM Scores
At this time, Snap has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Snap has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Snap (SNAP) Up 34% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Snap (SNAP - Free Report) . Shares have added about 34% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Snap due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
SNAP’s Q3 Earnings Surpass Estimates, Revenues Increase Y/Y
Snap reported third-quarter 2023 earnings of 2 cents per share, beating the Zacks Consensus Estimate by 150%. The metric declined 75% year over year.
Revenues increased 5.3% year over year to $1.19 billion, which beat the Zacks Consensus Estimate by 7.55%.
Daily active users (DAU) at the end of the reported quarter were 406 million, up 11.8% year over year. Snap added 43 million DAU on a year-over-year basis.
Geographically, revenues from North America (66.2% of revenues) decreased 3.1% year over year to $786.15 million. Revenues from Europe (16.9%) increased 24.1% to $200.3 million. Rest of the World (ROW) revenues were $202.1 million, up 30% year over year.
The average revenue per user (ARPU) decreased 5.8% year over year to $2.93. On a year-over-year basis, the ARPU of North America decreased 3.8%, while the ARPUs of Europe and ROW increased 15.3% and 7.9%, respectively.
Improvement of User Engagement in the Third Quarter
North America DAU was 101 million, up 1% year over year. Europe DAU was 95 million, up 8% year over year and ROW DAU was 211 million at the end of the reported quarter, up 20.6% year over year.
In the third quarter, Snap added new publisher deals and renewed agreements with ITV in the U.K., ProSieben in Germany, Network 18 in India and ESPN in the Netherlands.
The Snapchat+ subscription service reached more than 5 million paying subscribers in the third quarter. The company made considerable progress in diversifying revenues with Snapchat+, ARES and sponsored AR advertising.
SNAP is broadening its presence in the realm of generative artificial intelligence through the introduction of many AI-integrated features. More than 200 million people have used the company’s AI chatbot.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 19.1% year over year to $555.8 million.
Adjusted operating expenses were $1.01 billion, down 7.7% year over year.
Sales and marketing expenses increased 10% year over year to $297.3 million and general and administrative expenses declined 15.7% year over year to $221.1 million. Research and development expenses contracted 12.4% year over year to $494.6 million.
Adjusted EBITDA was $40.1 million, down 44.8% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2023, cash and cash equivalents and marketable securities were $3.6 billion compared with $3.7 billion as of Jun 30, 2023.
Operating cash flow was $13 million in the third quarter of 2023 compared with $56 million in the year-ago quarter.
Free cash flow was negative $61 million in the third quarter of 2023 compared with $18 million in the year-ago quarter.
Q4 Guidance
Per internal forecast, built on the assumption that DAU will reach 410 million to 412 million, the company expects a revenue range of $1,320 million to $1,375 million, implying year-over-year growth of around 2% to 6%. Within this range of revenue, Snap estimates that adjusted EBITDA will be between $65 million and $105 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted -9.26% due to these changes.
VGM Scores
At this time, Snap has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Snap has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.