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Snap Inc (NYSE:SNAP) Invites Theories and Bears

Snap Inc (NYSE:SNAP) continues to be a whipping post of the tech sector. The company just reported its Q3 numbers, and the results were poor, with shares reacting to the downside once again. Part of the problem is that the stock was massively overpriced when it went live on the market, and has been working against inflated expectations ever since. However, most of the problem is the company’s poor performance since.

And Q3 was another good example, as DAU’s keep dropping. In raw numbers: SNAP Reports Q3 (Sep) loss of $0.12 per share, excluding non-recurring items, $0.02 better than the S&P Capital IQ Consensus of ($0.14); revenues rose 43.2% year/year to $297.7 mln vs the $283 mln S&P Capital IQ Consensus; Adj-EBITDA of ($138.4 mln) vs. ($167.2 mln) estimate. Q3 DAUs were 186 mln vs. 188 mln last quarter and vs. 187 mln estimate. Co issues guidance for Q4, sees Q4 revs of $355-380 mln vs. $375.30 mln S&P Capital IQ Consensus; sees Adj-EBITDA of ($100-75 mln) vs. ($108 mln) estimate. It wasn’t pretty.

Snap Inc (NYSE:SNAP) trumpets itself as a firm that operates as a camera company in the United States and internationally.

The company offers Snapchat, a camera application that helps people to communicate through short videos and images. It also provides Camera, a tool to personalize and add context to Snaps; Friends Page that allows to creating and watching stories, chatting with groups, making voice and video calls, and communicating through a range of contextual stickers and Bitmojis; and Discover that helps to surface the most interesting stories from publishers, creators, and the community, based on a user’s subscriptions and interests.

In addition, the company offers Snap Map, which enables individuals to pinch on the camera screen for bringing a live map of their location, as well as showing nearby friends, popular stories, and a heatmap of recent Snaps posted to their story; Memories that allows users to choose to save the Snaps they create in a searchable personal collection, and users to create Snaps and stories from their saved Snaps and camera roll; and Spectacles, a hardware product that connects with Snapchat and capture video from a human perspective.

The company was formerly known as Snapchat, Inc. and changed its name to Snap Inc. in September 2016. Snap Inc. was founded in 2010 and is headquartered in Venice, California.



We started off by noting that SNAP recently hit the wires with the announcement of its Q3 numbers, showing a loss and an underperformance against expectations in terms of its key DAU stat, as well as forward guidance that didn’t alleviate the gloom.

The stock has suffered a bit of late, with shares of SNAP taking a hit in recent action, down about -8% over the past week. The question now is this: have we seen the poor trends baked into the price?

Any even theoretical understanding of how the company might be able to right the ship in the next two quarters could bake in a low off this latest dive.

However, we simply don’t have that theory right now.

Here are the highlights from the company’s slide deck accompanying the call:

We have been developing a completely new version of our Android application to be lightweight, modular, and performant. The Android community represents a global growth opportunity for us and we are making good progress testing the application in select markets. We look forward to rolling it out when it’s ready.

We continue to improve monetization as we scale our advertising business and our results demonstrate meaningful progress.

In terms of monetization, this quarter we increased the number of active advertisers on our platform and expanded our product suite. Advertisers are achieving a high return on advertising spend, driving strong revenue growth. Total impressions were up 278 percent year-over-year and 37 percent sequentially, while pricing was down 61 percent year-over-year and 15 percent sequentially.

We have now successfully transitioned to a self-service advertising model that can serve brand, direct response, and always-on advertisers.

Similar to last quarter, we are not giving specific DAU guidance, although our outlook assumes that Q4 DAUs will decline sequentially.

Looking forward to 2019, our internal stretch output goal will be an acceleration of revenue growth and full year free cash flow and profitability.

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