What analysts are saying about Snap’s disastrous first quarter as a public company (SNAP)

SNAP IPO 6 Evan Spiegel

Snap stock plunged more than 20% on Wednesday after the company announced a disappointing first set of financial results since becoming a public company.

Its Q1 revenue — $149.6 million (£116 million)— missed analyst expectations as user growth slowed for the photo-sharing company.

Snap added just 8 million new daily users in the first three months of the year, representing year-on-year growth of 36%. At this time last year, Snapchat was growing its DAUs by 52%.

Snapchat’s weak user growth comes as Facebook has intensified its mimicking of the Snapchat Stories format across its suite of apps. Instagram Stories recently outpaced Snapchat by reaching 200 million daily users.

Here are the key numbers from Snap’s Q1 results:

  • EPS (adjusted): Net loss of $0.20 vs. $0.16.
  • Revenue: $149.6 million vs. $159 million expected, up 286% from $39 million in the year-ago period.
  • Daily active users: 166 million, an increase of 36% from 122 million in the year-ago period.
  • Net loss: $2.2 billion

Read on to see what analysts had to say about the results …

William Blair: BULLISH

Rating: Outperform

Price target: N/A

Comment: “Shares of Snap are down about 23% in the aftermarket after missing the Street’s estimates on users, revenue, and EBITDA in its first reporting quarter since going public. In our view, most investors were focused on the company’s DAUs metric heading into the print with concerns about how competition from Facebook (FB $150.29; Outperform) might affect the metric. Snap’s slight miss on DAUs should not materially change the bull or bear debate on this topic, in our view. Recall, Snap’s strategy is largely DAU monetization versus trying to grow the DAU metric at a faster rate.”

Citi: BULLISH

Rating: Buy

Price target: $24

Comment: “Snap reported mixed 1Q17 results, with revenue in-line but Adj. EBITDA and DAUs missing Citi estimates. We expect pressure on the stock to continue near term as the 1Q17 report did little to address investor concerns over the growth outlook for users. That being said, we remain encouraged by other engagement KPIs, with avg. time spent on Snapchat now over 30 minutes per day (vs. 25-30 minutes previously reported), snaps taken per day growing to 3bn (vs. >2.5bn previously reported), and avg. sessions per day rising in the quarter. On the revenue front, Snap continues to make progress in campaign measurement and in automating ad buys – key steps in ensuring long-term revenue growth, and announced that 20% of Snap ads are now delivered programmatically. Though we expect the stock to trade down on these results, we continue to see the low rate of monetization and the high rate of engagement enabling revenue growth and margin leverage over the long-term. As such we maintain our Buy rating, but lower our price target to $24 from $27 due to near-term forecast revisions (see Fig. 2, page 3). With the stock trading down in the after-market, our ETR comes around 36%.”

Namora: SELL

Rating: Reduce

Price target: $14

Comment: “As we wrote in our initiation report, ‘The Ghosts of Slowing Growth,’ SNAP came to the public markets just as its user and monetization growth were both starting to meaningfully slow. It now faces incrementally fierce competition from deeper-pocketed rivals including FB, and continues to trade at a valuation that looks quite lofty to us, even considering yesterday’s aftermarket selloff. Some had thought SNAP’s initial quarters of monetization would follow more of a benign path given the potential for marketers to put experimental ad budgets to work on an app with a heavily engaged millennial user base, but YoY ad revenue/ARPU growth rates decelerated substantially once again, just as they did in the quarters leading up to the IPO. Revenue growth estimates will come down in our model, and as such, we maintain our Reduce rating and lower our Target Price to $14.”

See the rest of the story at INSIDER
Source: http://www.thisisinsider.com/snap-q1-analyst-facebook-blame-2017-5

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