This story keeps repeating, U.S. social networking company Snap reports earnings, they miss, the stock gets drilled. SNAP traded down to $7.59 -3.19 or-29.61% today. The shares are now down -$67.51 or -89.88% in the past year. Things keep getting dramatically worse, hopes of decent growth has disappeared. The maker of the vanishing-message app Snapchat revenue growth is vanishing also spiraling lower to just 5.7%, its lowest growth rate on record. Rising competition, especially from TikTok, and Apple’s $AAPL iOS privacy changes are proving overwhelming.
Snap Q3 22 Earnings
Q3 2022 earnings released at 4:00 p.m ET Thursday 10/20/22; conference call followed
- Earnings per share: 8 cents, adjusted, versus a small loss just shy of breakeven expected, according to a Refinitiv survey of analysts
- A surprise adjusted profit, BUT Snap’s net loss surged 400% to $360 million, partly due to a $155 million restructuring charge.
- Revenue: $1.13 billion versus $1.14 billion expected, according to Refinitiv
- Snap’s Q3 revenue grew 6% from a year earlier, the first time into single digits since the 2017 IPO.
- Global Daily Active Users (DAUs): 363 million versus 358.2 million expected, according to StreetAccount. Up19% year-over-year
- Average revenue per user (ARPU) was down 11% to $3.11.
- Users are spending less time overall on SNAP’s app. U.S., total time spent watching contend dipped by 5%, primarily due to lower engagement with Friend Stories.
- In August, Snap announced that it would lay off 20% of 6,000 employees as part of a major restructuring plan. Severance and related costs a big part of the restructuring charge in the period.
- Snap’s board authorized a stock repurchase program of up to $500 million.
- The company had $4.4 billion in cash, cash equivalents, and marketable securities as of Sept. 30.
- SNAP traded down to $7.59 -3.19 or-29.61% today
ARPU continued to trend lower to $3.11 from $3.20 last quarter and $3.49 in 3Q21, reflecting softening advertiser demand and a degradation of user monetization. What is sending shivers through the industry though is SNAP’s acknowledgement that even companies in high growth verticals are reassessing their spending plans. In recent quarters, industries such as travel and online retail have remained strong, but it appears that the softness is now spreading into those areas. From this there are lower bids per advertising action and lower overall campaign budgets.
Find me a Bright Spot!
Spotlight, which is SNAP’s answer to TikTok’s short format videos experienced a 55% yr/yr increase in user viewing time with active users surpassing 300 mln. In Q4, SNAP plans to expand its advertising tests for Spotlight.
Bleak Outlook
No forward Guidance, again.
Snap also said that it wouldn’t give guidance for the fourth quarter, marking a second consecutive period in which it’s chosen not to offer a forecast.
“Forward looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” the company said.
However, in the Investor Letter, SNAP disclosed that its internal forecast for Q4 is that revenue will be approximately flat yr/yr basis, equating to revenue of $1.3 bln. The company is also internally projecting EBITDA of $200 mln, below analysts’ expectations.
Snap’s letter to investors was as bleak can be, hence the stock’s reaction. The destruction is spelled out. Advertising partners are decreasing their marketing budgets with inflation-driven cost pressures, rising costs of capital, and operating environment headwinds.
“Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition. We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital,” the letter to investors reads.
“In some industries where topline growth remains strong, but businesses are experiencing input cost pressure due to inflation, we have observed reduced campaign budgets as businesses seek to offset input cost pressures. In many high growth sectors, businesses are reassessing investment levels amid the rising cost of capital. We experience this on our advertising platform in the form of decreased brand-oriented advertising spending, but also in the form of lower bids per action and lower overall campaign budgets.”
Snap’s gloomy outlook smashed digital advertising stocks, including shares of Meta Platforms (META), Twitter (TWTR), Alphabet (GOOG), Pinterest (PINS), Roku (ROKU), and The Trade Desk (TTD). Eyes are now the next group of earnings from these companies. GOOG is scheduled to issue quarterly results on October 25, while META and PINS are set for October 26 and October 27, respectively.
The world’s macro woes come after changes to iOS from Apple and supply-chain issues leading to reduced advertiser demand had already smashed the company. The company had already said it expects revenue expansion to slow due to Apple Inc.’s new policy that requires apps to ask users whether they want to be tracked.
The new rules made it difficult for advertisers to test and measure their campaigns, Snap said. The move prompted complaints from companies that use such tracking technology to sell ads, and led to a running, public fight between Apple and Facebook Inc. Snap shares plummeted around a fifth of its value on that back when it first happened which was around 70% ago for $SNAP.
From The TradersCommunity News Desk