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Why Is Snap (SNAP) Down 2.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Snap (SNAP - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Snap due for a breakout? 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 fourth-quarter 2023 earnings of 8 cents per share, which beat the Zacks Consensus Estimate by 14.29% but declined 42.9% year over year.
Revenues increased 4.7% year over year to $1.36 billion and missed the Zacks Consensus Estimate by 1.84%. The top-line growth was driven by the company’s focus on investing in direct-response business to deliver increased return on ad spend for advertising partners.
The brand-oriented advertising business declined 3% year over year, while the direct-response advertising business grew 3% year over year. Other revenues, which were driven primarily by Snapchat+, surged more than 200% year over year in the fourth quarter.
Daily active users (DAU) at the end of the reported quarter were 414 million, up 10.4% year over year. Snap added 39 million DAU on a year-over-year basis. Monthly active users (MAU) increased more than 8% year over year and surpassed 800 million in the fourth quarter.
Geographically, revenues from North America (66.1% of revenues) rose 2.2% year over year to $899.5 million. Revenues from Europe (17.5%) increased 9% to $238.3 million. Rest of the World (ROW) revenues were $223.5 million, up 11.3% year over year.
The average revenue per user (ARPU) decreased 5.2% year over year to $3.29. On a year-over-year basis, the ARPUs of North America and Europe increased 2.2% and 4.6%, respectively, while the ARPU of ROW decreased 6.4%.
User Engagement Improves in the Fourth Quarter
North America’s DAU was 100 million, flat year over year. Europe’s DAU was 96 million, up 4.3% year over year and ROW’s DAU was 218 million at the end of the reported quarter, up 11.3% year over year.
In the fourth quarter, overall time spent watching content globally grew on a year-over-year basis, driven primarily by strong growth in total time spent watching Spotlight. Total time spent watching Spotlight content increased more than 175% year over year and the average MAU watching Spotlight increased more than 35% year over year.
More creators posted content to Snapchat, with total Public Stories posted by Snap Stars growing more than 125% year over year in fourth-quarter 2023 in the United States.
In the fourth quarter, Snap signed a new publisher deal with Spotify in the United States, which will bring shorter-form highlights from Spotify’s podcasts to Spotlight and Stories.
Snap continued to diversify its revenue base with Snapchat+, which reached more than seven million subscribers in the reported quarter.
The company also announced new artificial intelligence (AI)-powered features for Snapchat+ subscribers, giving them the ability to enhance their Snaps and create as well as send AI-generated images based on a text prompt.
Operating Details
In the quarter under review, the adjusted cost of revenues increased 31.4% year over year to $615 million.
Adjusted operating expenses were $587 million, down 2% year over year.
Sales and marketing expenses decreased 11.1% year over year to $193 million, while general and administrative expenses increased 11.3% year over year to $168 million. Research and development expenses contracted 2.2% year over year to $226 million.
Adjusted EBITDA was $159.1 million, down 31.8% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2023, cash and cash equivalents and marketable securities were $3.5 billion compared with $3.6 billion as of Sep 30, 2023.
Operating cash flow was $164.5 million in the fourth quarter of 2023 compared with $125.2 million in the year-ago quarter.
Free cash flow was $110.85 million in the fourth quarter of 2023 compared with $78.36 million in the year-ago period.
The company repurchased 18.4 million shares at a cost of $189 million in the fourth quarter, reflecting an average share repurchase price of $10.28.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -24.57% due to these changes.
VGM Scores
Currently, Snap has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Snap has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Snap is part of the Zacks Internet - Software industry. Over the past month, Meta Platforms (META - Free Report) , a stock from the same industry, has gained 5.6%. The company reported its results for the quarter ended December 2023 more than a month ago.
Meta Platforms reported revenues of $40.11 billion in the last reported quarter, representing a year-over-year change of +24.7%. EPS of $5.33 for the same period compares with $3 a year ago.
For the current quarter, Meta Platforms is expected to post earnings of $4.27 per share, indicating a change of +61.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.8% over the last 30 days.
Meta Platforms has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is Snap (SNAP) Down 2.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Snap (SNAP - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Snap due for a breakout? 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 Q4 Earnings Surpass Estimates, Revenues Rise Y/Y
Snap reported fourth-quarter 2023 earnings of 8 cents per share, which beat the Zacks Consensus Estimate by 14.29% but declined 42.9% year over year.
Revenues increased 4.7% year over year to $1.36 billion and missed the Zacks Consensus Estimate by 1.84%. The top-line growth was driven by the company’s focus on investing in direct-response business to deliver increased return on ad spend for advertising partners.
The brand-oriented advertising business declined 3% year over year, while the direct-response advertising business grew 3% year over year. Other revenues, which were driven primarily by Snapchat+, surged more than 200% year over year in the fourth quarter.
Daily active users (DAU) at the end of the reported quarter were 414 million, up 10.4% year over year. Snap added 39 million DAU on a year-over-year basis. Monthly active users (MAU) increased more than 8% year over year and surpassed 800 million in the fourth quarter.
Geographically, revenues from North America (66.1% of revenues) rose 2.2% year over year to $899.5 million. Revenues from Europe (17.5%) increased 9% to $238.3 million. Rest of the World (ROW) revenues were $223.5 million, up 11.3% year over year.
The average revenue per user (ARPU) decreased 5.2% year over year to $3.29. On a year-over-year basis, the ARPUs of North America and Europe increased 2.2% and 4.6%, respectively, while the ARPU of ROW decreased 6.4%.
User Engagement Improves in the Fourth Quarter
North America’s DAU was 100 million, flat year over year. Europe’s DAU was 96 million, up 4.3% year over year and ROW’s DAU was 218 million at the end of the reported quarter, up 11.3% year over year.
In the fourth quarter, overall time spent watching content globally grew on a year-over-year basis, driven primarily by strong growth in total time spent watching Spotlight. Total time spent watching Spotlight content increased more than 175% year over year and the average MAU watching Spotlight increased more than 35% year over year.
More creators posted content to Snapchat, with total Public Stories posted by Snap Stars growing more than 125% year over year in fourth-quarter 2023 in the United States.
In the fourth quarter, Snap signed a new publisher deal with Spotify in the United States, which will bring shorter-form highlights from Spotify’s podcasts to Spotlight and Stories.
Snap continued to diversify its revenue base with Snapchat+, which reached more than seven million subscribers in the reported quarter.
The company also announced new artificial intelligence (AI)-powered features for Snapchat+ subscribers, giving them the ability to enhance their Snaps and create as well as send AI-generated images based on a text prompt.
Operating Details
In the quarter under review, the adjusted cost of revenues increased 31.4% year over year to $615 million.
Adjusted operating expenses were $587 million, down 2% year over year.
Sales and marketing expenses decreased 11.1% year over year to $193 million, while general and administrative expenses increased 11.3% year over year to $168 million. Research and development expenses contracted 2.2% year over year to $226 million.
Adjusted EBITDA was $159.1 million, down 31.8% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2023, cash and cash equivalents and marketable securities were $3.5 billion compared with $3.6 billion as of Sep 30, 2023.
Operating cash flow was $164.5 million in the fourth quarter of 2023 compared with $125.2 million in the year-ago quarter.
Free cash flow was $110.85 million in the fourth quarter of 2023 compared with $78.36 million in the year-ago period.
The company repurchased 18.4 million shares at a cost of $189 million in the fourth quarter, reflecting an average share repurchase price of $10.28.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -24.57% due to these changes.
VGM Scores
Currently, Snap has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Snap has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Snap is part of the Zacks Internet - Software industry. Over the past month, Meta Platforms (META - Free Report) , a stock from the same industry, has gained 5.6%. The company reported its results for the quarter ended December 2023 more than a month ago.
Meta Platforms reported revenues of $40.11 billion in the last reported quarter, representing a year-over-year change of +24.7%. EPS of $5.33 for the same period compares with $3 a year ago.
For the current quarter, Meta Platforms is expected to post earnings of $4.27 per share, indicating a change of +61.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.8% over the last 30 days.
Meta Platforms has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.