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Snap Q1 earnings preview: Growth of daily active users will be the key focus area

Snap Inc (NYSE: SNAP) is set to report its first quarter of fiscal 2019 earnings results Tuesday after the market closes. So far, 2019 has been a good year for Snap and the stock had more than doubled since the beginning of this year.

READ: Snapchat-maker SNAP Inc Q1 2019 Earnings Story

On average, analysts estimate the social media company to post a loss of 12 cents per share on revenue of $306.48 million. This compares to a loss of 17 cents per share on revenue of $230.7 million in first quarter of 2018.

Snap fourth quarter 2018 earnings infographic

When Snap reported its Q4 2018 results, the company projected Q1 2019 revenue to be in the range of $285 million and $310 million, representing a year-over-year growth of 24% to 34%. Answering to an analyst’s question on Q1 daily active users projection, the company’s interim CFO Lara Sweet said that the company doesn’t foresee a sequential decline in daily active users count in the first quarter of 2019.

For the last reported quarter, the social camera company reported better-than-expected results. Fourth quarter loss of 4 cents per share and revenue of $390 million surpassed consensus estimated loss of 7 cents per share and revenue of $376.6 million. Daily active users count lowered to 186 million from 187 million in the fourth quarter of 2018 and was flat with third quarter of 2018.

Last Thursday, Wedbush Securities downgraded Snap from Outperform to Neutral and Vertical Group downgraded from Mixed to Negative. Shares of Snap closed down 0.68% at $11.67 on Thursday. On average, majority of the analysts covering Snap recommend to Hold the stock.

2018 was a challenging year for Snap. The stock lost 63% of its value in 2018. There were mixed reviews about the redesign of the app and the company’s redesign efforts failed to attract many users. Daily active users count decresesed gradually from 191 million at the end of first quarter of 2018 to 186 million at the end of fourth quarter of 2018. Some key executives also left the company in 2018 followed by CFO Tim Stone’s exit in January 2019. The company is still in search of finance and marketing chiefs.

Snap Inc (SNAP) Q1 2019 earnings preview - Daily Active Users Trend

Market research firm eMarketer predicts that Snapchat will lose monthly US users this year, with flattish growth in 2020. Between 2019 and 2023, eMarketer forecasts Snapchat to add 600,000 new US users. According to the report, the Facebook-owned Instagram is expected to add nearly 19 million new US users by 2023.

“Increased competition from new and existing social platforms is partly to blame for Snapchat’s decline,” said eMarketer senior analyst Jasmine Enberg. He also added that the recent product launches of Snapchat, including an in-app gaming platform, may improve user engagement and time spent, particularly among its core young user base.

Snap’s peer Twitter (TWTR) is also set to release its first quarter 2019 earnings results tomorrow. Instagram’s parent company Facebook (FB) will be reporting its quarterly results on Wednesday.

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