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Shares of Snap (NYSE:SNAP) are down 26% in pre-open Friday after the social media company delivered disappointing earnings for its third quarter.
Snap reported EPS of $0.08 to easily beat the consensus that was expecting a loss per share of $0.24. However, revenue grew just 6% to $1.13 billion while daily active users (DAUs) soared 19% YoY to 363 million. Analysts were looking for revenue of $1.12 billion and DAUs of 358.7 million.
“This quarter we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, reaccelerating and diversifying our revenue growth, and investing in augmented reality,” said Evan Spiegel, CEO of the company.
The average revenue per user (ARPU) was reported at $3.11, down 11% YoY and lower than the average analyst estimate of $3.19.
Shares were especially hit by the fact Snap didn’t provide Q4 guidance. On the earnings call, Snap said that it expects YoY revenue growth to further decelerate.
“We have set our internal forecasts based on the assumption that year-over-year revenue growth will be approximately flat in 4Q, and we estimate that Adjusted Ebitda would be approximately $200 million under that revenue assumption for 4Q,” the company said.
Snap also said its board approved a $500 million stock buyback plan.
Some analysts downgraded shares of SNAP following yesterday’s earnings report.
Bernstein analysts cut the rating to Market-Perform from Outperform on the company “that seems to have lost all momentum.” Analysts, who cut the price target to $9 from $15 per share, also stated that Snap failed to beat extremely low expectations going into the print.
“Revenues remain at the mercy of secular trends as a LIFO (last ad dollar added, first ad dollar cut) platform. Even the usually reliable engagement trends showed cracks, with time spent down in the US. A premature 8K and a non-guide guide only led to investor confusion, despite management’s transparency intentions. Can the new mission and refreshed executive team deliver the shift in performance trajectory required to get this fallen angel back on track? It’s unclear,” they said in a client note.
Morgan Stanley analysts cut the price target to $7 from $10 and ask – is the bear case playing out?
“Results highlight our concerns about forward ad growth –over reliant on branded, less proven spend, high execution risk with management/strategic change…in a weakening/more macro world. US time spent declines create new questions about growth/differentiation,” the MS analysts wrote.
