Why Is Snap (SNAP) Down 8% Since Last Earnings Report?

A month has gone by since the last earnings report for Snap (SNAP). Shares have lost about 8% 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 drivers. Snap Beats on Q3 Earnings & Revenues, Announces Buyback, Stock UpSnap reported third-quarter 2024 earnings of 8 cents per share, which beat the Zacks Consensus Estimate by 60% and surged 300% from the year-ago quarter. The stock jumped more than 10% in extended trading.Revenues increased 15.5% year over year to $1.37 billion and beat the Zacks Consensus Estimate by 1.36%.Geographically, revenues from North America (62.5% of revenues) increased 9.1% year over year to $857.6 million. Revenues from Europe (18.1% of revenues) increased 24.3% to $248.9 million. Revenues from Rest of the World (ROW) were $266.1 million, up 31.6% year over year.The average revenue per user (ARPU) increased 5.8% year over year to $3.10. On a year-over-year basis, the ARPU of North America, Europe and ROW climbed 9.2%, 19.4% and 13.5%, respectively.Steady User Engagement Aids Q3 SalesIn the third quarter, Snap introduced new AI-enabled features to spark conversations, make great Snaps and discover new things like bringing AI to Memories and improving My AI’s ability to problem solve.The company also launched new safety tools and resources designed to help educators and school administrators understand how their students use Snapchat, the key protections available to them, and resources to assist in their efforts to create safe and supportive environments for students.The results of these initiatives are reflected in Snap’s global community reaching 443 million daily active users (DAU) in the third quarter, up 9.1% year over year. Snap added 11 million DAU on a quarter-over-quarter basis. More than 75% of the 13–34-year-olds in over 25 countries use Snapchat. Total time spent watching content increased 25% year over year.North America’s DAU was 100 million, down 1% year over year. Europe’s DAU was 99 million, up 4.2% year over year. ROW’s DAU was 244 million at the end of the reported quarter, which jumped 15.6% year over year.Spotlight reached more than 500 million monthly active users on average in the third quarter, up 21% year over year. Over a billion Snaps were shared publicly on Snapchat every month in the reported quarter from the Snap community, creators and media partners.Snap announced an expanded strategic partnership with Alphabet-owned Google Cloud to power additional generative AI experiences within My AI, the company’s AI-powered chatbot.Snapchat+ reached 12 million subscribers in the quarter, doubling year over year.Improved Efforts Toward Ad Revenue GenerationBrand-oriented advertising revenues declined 1% year over year, reflecting weak demand from certain consumer discretionary verticals.Snap has long struggled against larger competitors like Facebook and Instagram owner Meta Platforms and peers like Pinterest. To better compete, Snap has invested in machine learning to improve its targeting of ads to users and also made it easier for small- and medium-sized businesses to advertise on Snapchat which contributed to total active advertisers more than doubling year over year in the third quarter.The company is in the early stages of experimenting with two new ad formats, Sponsored Snaps and Promoted Places, to help businesses reach Snapchatters in engaging ways across our differentiated service.Snap launched First Lens Unlimited, which offers advertisers the first impression of the day in the first slot of the Lens Carousel, allowing them to reach the Snap community at a greater scale.  Snap also launched State-specific First Story, which allows U.S. advertisers to target First Story takeover campaigns to individual states or to reach the entire country with different creative for each state, as selected by the advertiser.AR Platform Sees Healthy TractionSnap introduced the fifth generation of Spectacles, new see-through, standalone AR glasses that enable developers to use Lenses and experience the world together with friends, powered by Snap OS.Snap OS is a brand new and groundbreaking operating system with a natural interface that uses hands and voice, with no controller required. More than 375,000 AR creators, developers and teams from nearly every country in the world have built over four million Lenses. More than 150 million Spotlight videos have been created this year featuring Lenses made by Snap’s talented community of Lens Creators.Over 225 million Snapchatters engaged with more than 25 custom Olympic-related AR experiences globally during the Paris 2024 Games. Snap is rolling out a slate of new GenAI Suite features in Lens Studio that make it faster and easier to bring one’s creativity to life, including Animation Blending, Body Morph and Icon Generation.The company is making AR creation simpler with Easy Lens, a new tool that makes it possible to build Lenses in a matter of minutes, just by typing into a text prompt.Operating DetailsAdjusted cost of revenues increased 15.8% year over year to $636.6 million.  In the quarter under review, adjusted operating expenses were $604.1 million, up 0.9% year over year. Sales and marketing expenses increased 1.6% year over year to $213.4 million, and general and administrative expenses jumped 10.6% year over year to $178.8 million. Research and development expenses contracted 6.7% year over year to $211.8 million.Adjusted EBITDA was $132 million, up significantly from $40.1 million reported in the year-ago quarter.Balance Sheet and Cash FlowAs of Sept. 30, 2024, cash and cash equivalents and marketable securities were $3.2 billion compared with $3.08 billion as of June 30, 2024.Operating cash flow was $115.87 million compared with $12.78 million in the prior year.Free cash flow was $71.83 million compared with an outflow of $60.65 million reported in the year-ago quarter. The company authorized a new share repurchase program of $500 million.GuidanceFor fourth-quarter 2024, Snap expects total revenues between $1.51 billion and $1.56 billion, implying year-over-year growth of 11-15%. Adjusted EBITDA is expected between $210 million and $260 million.DAU is projected to be 451 million in the fourth quarter.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates revision.The consensus estimate has shifted 31.75% due to these changes.VGM ScoresCurrently, Snap has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Snap has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Snap Inc. (SNAP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks