Categories AlphaGraphs, Earnings, Technology

Earnings preview: User slump main concern as Snap gears up for Q4 report

Still haunted by the redesign debacle that drew some harsh reactions from the market, Snap (SNAP) is probably hoping for a turnaround this year. While the positive rating on the stock in recent months lifted the sentiment, the abrupt exit of CFO Tim Stone last month has put things back to square one.

Snap Q3 loss narrows
Snap Q3 2018 earnings infographic

The general perception is that the photo-sharing platform will report a narrower loss when it unveils the fourth-quarter results Tuesday after the closing bell. The consensus estimate for revenue is $376.6 million, which represents a 32% annual increase.

It needs to be noted that the company has a history of beating estimates consistently, which complements its efforts to achieve breakeven this year – by focusing more on third-party advertising and content partnerships.

When Snap reported its September-quarter results, the improvement in the bottom-line and revenue figures was nearly eclipsed by a drop in the number of users, continuing the trend seen in the preceding quarters. And, the stock suffered badly. While net loss narrowed by two cents to $0.12 per share and beat estimates, aided by a 43% revenue growth, the number of daily active users declined sequentially.

For the company, the progressive contraction of the user base is a cause for concern, especially in the wake of increasing competition from the likes of Instagram. Currently, the improvement in average revenue per user –  thanks to the revised prices – is the key to sustaining the positive momentum.

Customers seem to be ditching the app primarily due to the new design which according to experts is not appealing to the target users, especially when compared to the feature-rich Instagram and WhatsApp. In short, Snap’s ability to keep users engaged is inferior to that of its peers due to the limitations of the app.

Also see: Snap Q3 2018 Earnings Conference Call Transcript

Stone’s exit followed a series of executive departures, including chief strategy officer Imran Khan, communications VP Mary Ritti, HR head Jason Halpert and Content VP Nick Bell. The talent exodus is another dampener as far as recovery is concerned.

Snap shares progressively declined since the beginning of last year, losing as much as 63%. Having regained momentum in the recent weeks, they traded sharply higher during Friday’s regular session. However, the stock is still far below its post-IPO peak.

 

We’re on Apple News! Follow us to receive the latest stock market, earnings and financial news at your fingertips

Most Popular

AVGO Earnings: All you need to know about Broadcom Q1 2021 earnings results

Broadcom Limited (NASDAQ: AVGO) reported first quarter 2021 earnings results today. Total revenue increased 14% year-over-year to $6.65 billion. GAAP net income was $1.3 billion, or $3.05 per share, compared

Infographic: Costco (COST) Q2 2021 sales up 15%; earnings miss

Retail giant Costco Wholesale Corporation (NASDAQ: COST) reported higher earnings and revenues for the second quarter of 2021. Earnings missed analysts’ expectations, while sales beat. Net profit was $951 million

Will shifting to as-a-service model help Hewlett Packard in emerging stronger from COVID?

With the corporate world rapidly shifting to cloud-native computing after the virus outbreak changed work culture and the way businesses operate, technology providers are aggressively innovating their offerings. Hewlett Packard

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top