On The Fly: What to watch in Snap earnings report - InvestingChannel

On The Fly: What to watch in Snap earnings report

Snap Inc. (SNAP) is scheduled to report results of its fourth fiscal quarter after market close on February 6, with a conference call scheduled for 5:00 pm ET. What to watch for: 1. USER GROWTH: With its last report, Snap said that its Daily Average Users, or DAUs, had grown to 178M, up 17% year-over-year. That was down from the 21% year-over-year increase in DAUs reported in the second quarter and investors will surely be watching that metric closely to see if there is further slowing in user growth or if the trend has improved. 2. REDESIGN: Along with its last earnings report on November 8, Snap CEO Evan Spiegel said in a letter to investors that the company is redesigning Snapchat to make it easier to use, pointing out that the effort to make the app easier to understand and use comes with “a strong likelihood” of being “disruptive to our business in the short term.” Afterward, Morgan Stanley analyst Brian Nowak downgraded Snap to Underweight from Equal Weight, noting that Instagram (FB) competition is only increasing while the company’s pending app redesign creates further engagement and execution risks. The company’s weaker than expected Q3 revenue and DAU growth showed how its monetization and engagement challenges have been underappreciated and the chances of a turnaround have been overestimated, Nowak told investors. On November 29, Snap unveiled its redesigned app, which the company said “separates the social from the media.” 3. STREET FIGHT: Since the redesign, analysts have continued to be split on Snap shares. On December 5, Barclays analyst Ross Sandler upgraded Snap to Overweight from Equal Weight and raised his price target for the shares to $18 from $11. With the company’s pricing transition in the later stages, Snap may start hitting or exceeding consensus revenue estimates and accelerating growth in 2018, Sandler told investors. He thinks the investor narrative in 2018 can change from Facebook “is killing” Snap to “these companies can co-exist” like Priceline (PCLN) and Expedia (EXPE). On January 4, Cowen analyst John Blackledge downgraded Snap to Underperform and cut his price target on the stock to $11 after reducing his 2018-2022 estimates. Blackledge’s Ad Buyer Survey results for Snap were mixed, he said, with Survey Ad buyers preferring Instagram Stories ads versus Snap Ads, despite the firm’s consumer survey suggesting rising Snapchat user engagement in 2017 and higher user sharing and video/photo viewing. Later the same week, Jefferies analyst Brent Thill downgraded Snap to Hold with an unchanged price target of $15. He continues to have optimism around Snap’s platform, but believes “fundamental execution needs to be shown” before he can be more positive on the name. On January 12, Raymond James downgraded Snap to Underperform, with analyst Aaron Kessler saying Snap is largely a Chat/Message app and not a camera company as it refers to itself. Historically, chat and messaging apps do not monetize as well as News Feeds, the analyst wrote.