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Social media company Snap, owner of Snapchat plunged 13% Tuesday after missing second quarter earnings expectations with another large net loss. $SNAP has been a great reminder of risk, herd mentality and like MySpace the perils of betting on social media longevity.

SnapChat Fail

Snap Inc NYSE: SNAP Reported Earnings After Close Tuesday

$2.53 Beat $1.53 EPS AND $17.40 Billion Beat $17.80 Billion forecast in revenue. 

Earnings

Snap's second quarter net loss grew to $326 million, up nearly 28% from $255 million last year.

The Loss per share was 9 cents vs. 9 cents per Refinitiv and Revenue was $454 million vs. $439.1 million per Refinitiv

“At the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate,” CFO Andersen said. “This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”

Snap Inc NYSE: SNAP

Reaction After hours $21.30 -$3.41 (-$13.90%)

After Closing $24.74 USD −0.53 (2.10%) Closed: July 21, on Day

Highlights

Snap blamed the higher losses on long-term investments to “to build on the momentum we have established with our community, and our advertising partners,” as well as higher interest expense related to convertible notes, and a one-time gain from selling Placed, a location-based user data provider, in last year’s quarter.

  • Global daily active users (DAUs): 238 million vs. 238.48 million per FactSet
  • ARPU: $1.91 vs. $1.87 per FactSet
  • , up nearly 4% from the 229 million the company reported in April. That figure is up 17% compared to the 203 million daily users the company reported a year prior.

SNAP Q2 Earnings

Outlook

The photo sharing platform didn’t provide guidance for its third quarter of 2020 citing the uncertainties related to the ongoing COVID-19 pandemic and the rapidly shifting macro conditions,

The company said that so far in Q3, revenue is up 32% from the previous year, but it expects that growth to moderate through the rest of the quarter, ending up with growth of around 20%.

“Advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialize in the same way they have in prior years, including the back to school season, film release schedules, and the operations of various sports leagues,”

Andersen said. “At this point in time it is difficult to predict how these factors may impact advertising demand in the remainder of Q3.”

 

Another Risk - No-Voting Rights

Snap’s IPO Class A shares sold in their no offering have no voting power. This is a move by management that has never been seen before in any other IPO. A gamble that paid off with the hype of record stock market levels and the hype of the social media aspect. (the herd don't care about details)

Furthermore 50 million shares of the offering were subject to a one-year lockup agreement. This eliminates the ability to sell on the first day and the traditional selling pressure by taking a quarter of the float off the market. Here we are with the lock up expiration and we are at all time lows.

Source: AlphaStreet, TradersCommunity

From The TradersCommunity NewsDesk

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