Snap Inc. (NYSE:SNAP) Posts Earnings Results, Beats Expectations By $0.13 EPS

Aug 12, 2017, 00:09
Snap Inc. (NYSE:SNAP) Posts Earnings Results, Beats Expectations By $0.13 EPS

Arguably not getting enough attention along the way: The impact of Facebook's dominant position in social media advertising is weighing on Snap's revenue growth the same way it has already weighed on Twitter Inc.'s.

Spiegel praised Snapchat's famous dancing hot dog, calling it the "world's first augmented reality superstar".

It signals that even as Snapchat plays down user growth, having a strong and broad user base can be crucial to success.

Wall Street, on the other hand, doesn't appear to have the same confidence.

A share lock-up which expires this weekend could provide further misery for Snap and its CEO Evan Spiegel as tied-up investors get an opportunity to get out, Financial Spreads founder Adam Jepsen said. Some investors believe that on an analyst conference call following the quarterly report, Spiegel may reassure investors that he has no immediate plans to sell.

One bright spot: The company did manage to grow its average revenue per user to $1.05 from $0.50 in the year-ago period, a healthy increase of 109%. There was some on-the-surface good news. For comparison, two of Facebook's Snapchat Stories clones, Instagram Stories and WhatsApp Status, have now topped 250 million DAUs. That's compared to $8.3 million in Q1 and $4.5 million in Q4. Analysts polled by Bloomberg had expected 175 million on average. These are the numbers Wall Street is focused on, if not advertisers.

Humanity has now watched Snapchat's animated hot dog gyrate and breakdance more than 1.5 billion times. Though they probably wouldn't be almost as nice as a breakdancing hot dog. "Just because Yahoo has a search box doesn't mean they're Google". Yet, analysts said the tie-up is less about awesome content for Snap and more about TV networks trying to keep up with increasingly scattered audiences. Stifel Nicolaus lowered their price target on Snap from $22.00 to $18.00 and set a "buy" rating on the stock in a report on Friday. The company reported ($2.31) earnings per share for the quarter, missing the Zacks' consensus estimate of ($2.05) by $0.26. Users of the platform are highly engaged, and Snap's new ad buying platform is being rolled out which should reduce friction for advertisers.

But experts aren't impressed that Snap can't generate steady sales growth - "there is little excuse at this late in the game", James Cakmak of Monness, Crespi, Hardt & Co. said ahead of the earnings release. That was more than double the level the prior quarter, meaning ads were shifting more to automation quickly. Snap's quarterly revenue was up 153.1% compared to the same quarter past year. Until the company demonstrates ads in new sections are valuable, analysts and investors are left to do a lot of guesswork, and potentially bet on increased losses. The analyst asked which types of techniques Spiegel didn't like.