The social media company Snap had a poor earnings report on Wednesday. Shares fell up to 20 percent and could see more downside. Snap missed revenue estimates and is planning to have falling year to year growth in the next quarter. The company missed analysts predictions for the number of daily active users and revenue per share.
Morgan Stanley dropped its price target to $8 stating in a note to clients Wednesday. According to analyst Brian Nowak, "1Q:18 miss and forward ad commentary speak to continued challenges SNAP faces in turning its business model around."
Analysts at Deutsche Bank put a $12 price target on the stock with a hold rating. Deutsche Bank analyst, Lloyd Walmsley, stated in a note to clients Wednesday, "Snapchat risks losing its 'cool' status with users frustrated by the redesign, which makes advertisers increasingly unlikely to put money into Snap advertising without clear ROI returns. We think Snap is a 'show me' stories to advertisers (and investors), and has to move fast to change the narrative, particularly given its cash burn levels."
Snap Earnings Report Details
(1)Net loss for the three months ended March 31, 2017 includes $2.0 billion of stock-based compensation expense, primarily due to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for our initial public offering in March 2017.
(2)Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense) net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time, as described below.
(3)Free Cash Flow is defined as net cash used in operating activities, reduced by purchases of property and equipment.
(2)Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense) net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time, as described below.
(3)Free Cash Flow is defined as net cash used in operating activities, reduced by purchases of property and equipment.
Operational Highlights
- Daily Active Users (DAU)(1) grew from 166 million in Q1 2017 to 191 million in Q1 2018, an increase of 15% year-over-year. DAUs increased 2% quarter-over-quarter, from 187 million in Q4 2017.
- Revenue was $230.7 million in Q1 2018, up 54% year-over-year driven by growth in Snap Ads, and down 19% sequentially, primarily due to seasonality and our redesign.
- Average revenue per user (ARPU)(2) was $1.21 in Q1 2018, up 34% year-over-year and down 21% sequentially. Cost of revenue per user (CoRPU)(3) was $1.03 in Q1 2018, up 5% year-over-year and 1% sequentially.
- Adjusted EBITDA loss was $(217.9) million in Q1 2018, an increase of 16% year-over-year and 37% sequentially.
- Cash and marketable securities were $1.8 billion at March 31, 2018. Cash management reduced cash burn by 13% sequentially, to $222 million. Capital expenditures increased to $36.3 million in Q1 2018 compared to $18.0 million in Q1 2017 and $21.2 million in Q4 2017.
Read the full earnings report: https://investor.snap.com/news-releases/2018/05-01-2018-211516272