Snap (SNAP) Down 13.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Snap (SNAP). Shares have lost about 13.9% 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’s Q2 Earnings Surpass Estimates, Revenues Decline Y/Y
Snap reported second-quarter 2023 loss of 2 cents per share, beating the Zacks Consensus Estimate by 50%. The metric remained unchanged year over year.
Revenues declined 3.9% year over year to $1068 million, which beat the Zacks Consensus Estimate by 1.94%.
Daily active users (DAU) at the end of the reported quarter were 397 million, up 14.4% year over year. Snap added 50 million DAU on a year-over-year basis.
Geographically, revenues from North America (64.3% of revenues) decreased 12.6% year over year to $687 million. Revenues from Europe (17%) increased 7.1% to $182 million. Rest of the World (ROW) revenues were $198 million, up 27.7% year over year.
The average revenue per user (ARPU) decreased 15.9% year over year to $2.69. On a year-over-year basis, ARPUs of North America and Europe decreased 13.9% and 2.5%, respectively, while ARPU of ROW increased 2.1%.
Improvement of User Engagement in the Second Quarter
North America DAU was 101 million, up 2% year over year. Europe DAU was 94 million, up 9.3% year over year and ROW DAU was 202 million at the end of the reported quarter, up 24.7% year over year.
In the second quarter, Snap added new publisher deals and renewed agreements with ITV in the U.K., ProSieben in Germany, Network 18 in India and ESPN in the Netherlands.
The Snapchat+ subscription service reached more than 4 million paying subscribers in the second quarter. The company made considerable progress in diversifying revenues with Snapchat+, ARES and sponsored AR advertising.
The Snap Map is a personalized experience to view content, discover places and see what your friends are up to with the aim of increasing engagement. The Map is used by more than 350 million Snapchatters on a monthly basis.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 11.3% year over year to $496.9 million.
Adjusted operating expenses were $975.1 million, down 8.5% year over year.
Sales and marketing expenses decreased 9.9% year over year to $280.6 million and general and administrative expenses declined 12.9% year over year to $216.9 million. Research and development expenses contracted 5.4% year over year to $477.7 million.
Adjusted EBITDA was negative $38 million, down 642.9% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2023, cash and cash equivalents and marketable securities were $3.7 billion compared with $4.1 billion as of Mar 31, 2023.
Operating cash flow was negative $82 million in the second quarter of 2023 compared with negative $124 million in the year-ago quarter.
Free cash flow was negative $119 million in the second quarter of 2023 compared with negative $147 million in the previous quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -10.26% due to these changes.
VGM Scores
At this time, Snap has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Snap has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Snap belongs to the Zacks Internet - Software industry. Another stock from the same industry, F5 Networks (FFIV), has gained 2.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
F5 reported revenues of $702.64 million in the last reported quarter, representing a year-over-year change of +4.2%. EPS of $3.21 for the same period compares with $2.57 a year ago.
F5 is expected to post earnings of $3.22 per share for the current quarter, representing a year-over-year change of +22.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for F5. Also, the stock has a VGM Score of C.
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 Report
F5, Inc. (FFIV) : Free Stock Analysis Report
