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Snap (SNAP) to Post Q1 Earnings: Factors to Influence Results

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Snap Inc. (SNAP - Free Report) is set to report first-quarter 2019 results on Apr 23.

The company beat the Zacks Consensus Estimate in three of the trailing four quarters, delivering average positive earnings surprise of 20.5%.

Notably, in the last reported quarter, Snap’s subscriber growth reflected by Daily Active Users (DAUs) was down 1 million year over year but was unchanged sequentially at 186 million.

For the first quarter, the company expects revenues between $285 million and $310 million, reflecting growth of 24-34%. The lack of Olympic-related revenues in the first quarter, which contributed modestly to the year-ago quarter’s revenues, will likely impede top-line growth.

The Zacks Consensus Estimate for revenues is currently pegged at $306.3 million, which indicates year-over-year growth of 32.8%. Moreover, the consensus mark for loss has remained steady at 12 cents over the past 30 days.

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.

User Growth Rate Likely to be Flat

Lackluster user growth mainly due to intensifying competition from Facebook’s (FB - Free Report) Instagram is a primary concern for investors. Snap undoubtedly is quite popular among the younger demography, but its failure to attract the older generation (aged above 34 years) has been a negative.

The delay in the Android app design launch, which is currently in beta, has negatively impacted user base growth rate. However, improving user engagement is noteworthy.

Moreover, 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 expected to hurt top-line growth in the to-be-reported quarter.

Original Shows & E-commerce Initiatives: Key Catalysts

Nevertheless, Snap is leaving no stone unturned to get back on its growth trajectory. Snap Originals, partner-curated Our Stories and partnerships with the likes of Comcast and Viacom are steps toward that direction.

Snap is enhancing user experience in the AR space with features like Show Portals, lenses and filters. Moreover, the company’s expanded AR platform and Snap Camera, which let people use their favorite lenses while creating or streaming videos on desktops and laptops, are expected to drive user engagement.

Snap is also improving shopping experience of its users through the Snapchat camera by partnering with Amazon. During the quarter, the company announced collaboration with LEGO Wear to launch the latter’s first limited-edition clothing line for adults. Notably, this reflects Snap’s evolution from a mere photo or video sharing application to an AR-supported technology provider.

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 +1.94%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are a couple of other stocks you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat.

Twilio (TWLO - Free Report) has an Earnings ESP of +136.35% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. Ltd. (WIX - Free Report) has an Earnings ESP of +66.67% and a Zacks Rank #3.

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