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Social media company Snap, owner of Snapchat reported better than expected third quarter earnings expectations with revenues up 52% year-over-year and a adjusted EPS of $0.01 versus a loss of $0.04 last year. Daily active users rose by 18% year-over-year to 249 million.

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. 

Due to the uncertainty related to the COVID-19 pandemic, the company is not providing any guidance.

Earnings

Snap's third quarter 2020 net loss narrowed to $199.8 million, or 14 cents per share, from $227.37 million, or 16 cents per share, a year earlier. The company showed revenue of $678.7M beating exp $559.2M and Adj EPS of $0.01 beat exp Loss of $0.051), The same period from last year had a net loss of $0.04 per share and $446.2 million in revenue.

Last quarter CFO Andersen said the company said 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,” “This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.” We clearly have seen a continuation from this trend

 

Snap Inc NYSE: SNAP

Reaction After hours $34.99▲ 6.58 (23.16%) After Hours

After Closing 28.41 ▼ 0.25 (0.87%) Closed: October 20 Ahead of report

 

Snap has benefited from the negatives from Twitter and Facebook and constant TikTok battle with the US Administration.  Brands see it as a safe place for brands to advertise because it focuses on one-on-one messages which disappear once they are read. In the third quarter over 1,000 advertisers boycotted larger rival Facebook Inc FB. for the month of July in response to issues of hate speech on the platform. 

Short-form video app TikTok faced the possibility of a U.S. ban over national security concerns. It opened an opportunity for Snap as companies reviewed their ad spending, and helped contribute to revenue growth, said Jeremi Gorman, Snap’s chief business officer, in prepared remarks for an earnings call with analysts.

Highlights

  • During the quarter, daily active users (DAU) increased to 249 million compared to 211 million in the third quarter last year.
  • DAUs increased sequentially and year over year on both iOS and Android platforms.
  • Average revenue per user (ARPU) increased 28% year over year to $2.73.
  • Cash, cash equivalents, and marketable securities totaled $2.73 billion, versus $2.11 billion at the end of the previous fiscal year.

 

SNAP Earnings Q3 2020

 

Outlook

Snap 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 it expected continued momentum in user growth and forecast about 257 million daily active users in the fourth quarter. The consensus estimates are calling for $0.02 in EPS and $721.48 million in revenue for the coming quarter..

 Be Aware of the 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 eliminated the ability to sell on the first day and the traditional selling pressure by taking a quarter of the float off the market. The lock up expiration came at then all time lows.

Source: AlphaStreet, TradersCommunity

From The TradersCommunity NewsDesk

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