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Snap (SNAP) to Report Q4 Earnings: What's in the Cards?

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Snap Inc. (SNAP - Free Report) is set to report fourth-quarter 2018 results on Feb 5.

The company beat the Zacks Consensus Estimate in three of the trailing four quarters, delivering average positive surprise of 11.3%

In the last reported quarter, the company's loss of 12 cents per share was narrower than both the Zacks Consensus Estimate and year-ago quarter’s loss of 14 cents.

Revenues surged 43.2% from the year-ago quarter to $297.7 million, better than the consensus mark of $283 million.

For the fourth quarter, Snap expects revenues between $355 million and $380 million, reflecting growth of 24-33%. Adjusted EBITDA loss is expected to be between $75 million and $100 million compared with a loss of $159 million in the year-ago quarter.

The Zacks Consensus Estimate for loss has remained steady at 8 cents over the past 30 days. Moreover, the consensus mark for revenues is currently pegged at $376.6 million, which indicates year-over-year growth of 31.8%.

Snap Inc. Price and EPS Surprise

Snap Inc. Price and EPS Surprise | Snap Inc. Quote

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Q4 Results

Lackluster user growth is the primary concern for investors, mainly due to intensifying competition from Instagram. Snap undoubtedly is quite popular among younger demography but its failure to attract the older generation (above 34 year olds) has been a negative.

Snap’s Daily Active Users (DAU) increased 5% year over year but decreased 1% sequentially to 186 million. North America DAU was 79 million, up 3% year over year but down 1.3% sequentially.

Snap expects DAU to fall sequentially in the fourth quarter. The delay in the Android app design launch is hurting user base growth rate. Moreover, the DAU 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. This is negatively impacting top-line growth.

Moreover, executive exodus has been a concern for Snap. The company hired Jeremi Gorman from Amazon and Jared Grusd from The Huffington Post to replace chief strategy officer Imran Khan. Jeremi Gorman was appointed as the new chief business officer, while Jared Grusd became the chief strategy officer.

However, executives like vice president of content NicK Bell and hardware chief Sahil Sharma left the company.

Nevertheless, Snap is leaving no stone unturned to turn around its fortunes. Snap Originals, partner curated Our Stories and partnerships with the likes of Comcast (CMCSA - Free Report) and Viacom (VIAB - Free Report) are steps toward that direction.

Commercials, 6-second, non-skippable ads that appear only within premium content, including 12 new Snap Original Shows, is expected to boost ad revenues.

Further, Snap launched a local version of Discover in India, which follows expansions into the United States, France, Germany, Norway and the Middle East. Notably, in the last reported quarter, 21 unique shows in Discover reached a monthly audience of more than 10 million.

Snap is also improving shopping experience of its users through the Snapchat camera by partnering with Amazon. Moreover, the company added features to the Ad Manager solution, including video views, consideration objectives (website visits and app installs) and conversion objectives (in-app purchases).

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Snap has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Stock That Warrants a Look

Here is a stock you may want to consider as our model shows that it has the right combination of elements to deliver an earnings beat in the to-be-reported quarter.

Twitter (TWTR - Free Report) has an Earnings ESP of +13.03% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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