After Snap Inc. shares initially sank in the news of its second-quarter results on Tuesday, they recovered quickly once analysts read the fine print and dug deep into the numbers.
Quarterly losses increased, but so did daily active users and revenue, with strong indications that the current quarter is shaping up to be a good one in the COVID-19 era.
In summary, Snap said it lost $ 326 million, or 23 cents a share. Sales improved 17% to $ 454 million, above FactSet estimates. Daily active users increased 17% to 238 million. Chief Financial Officer Derek Andersen estimated 32% year-over-year revenue growth of 32% through July 19.
Going back from Snap’s SNAP,
The shares offer valuable insights into the fortunes of the social media industry, and a harbinger of other quarterly results from Twitter Inc. TWTR,
, Facebook Inc. FB,
, Parent company of Google Alphabet Inc. GOOGL,
GOOG,
and Pinterest Inc. PINS,
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Snap’s shares fell 7% in trading late Wednesday. However, a handful of Wall Street analysts see an advantage for Snap in the rest of the year as advertising returns to digital platforms. Snap should also take advantage of advertisers’ July boycott of Facebook for hate speech on their platforms.
“We see SNAP’s expectation of 20% annual revenue growth for the third quarter as conservative given the 32% growth through July 19, the return of brand spending and revenue recovery in the rest of the world” , wrote Jefferies analyst Brent Thill, who holds a buy and target price rating of $ 30. “The second quarter should be the lowest point for growth in SNAP revolutions and believe there are broad product catalysts to increase the numbers (and the stock). “
“We believe Snap is performing better than its social media peers in recent months with its exposure to direct-response advertisers, accelerating innovation and higher TV advertiser engagement for 2020 Upfronts,” said MKM Partners analyst Rohit. Kulkarni in a note, reiterating a buy rating and $ 29 target price. “When the world returns to a ‘new normal,’ we believe Snap will position itself stronger with diverse demand from advertisers, a well-run self-service advertising platform. developed and a wider and more committed audience. ”
AB Bernstein’s Mark Shmulik invoked yoga to give Snap his blessing as a long-term investment. “Yin is a type of yoga that is generally performed at a slower pace and famous for holding each position for a long time,” he said in a note that maintains a top performance rating with a target price of $ 28. “For those on the fence, it’s time to turn into SNAP Yin bulls. “
“Compared to our Snap estimates prior to COVID-19, we now anticipate slightly higher revenues for 2022 (+ 3%) driven by stronger long-term growth due to the shift in advertising spending to digital platforms since the COVID-19 pandemic, “Moffett Nathanson Analyst Michael Nathanson said in a note, maintaining a neutral rating and a $ 22 price target on Snap stock.
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Barclays analyst Ross Sandler gave a more unbiased tone, characterizing the results as “solid” but “lagging a bit behind purchase expectations.” He remains optimistic about Snap’s long-term vision, but is concerned in the short term about volatility in stocks based on the overall recovery in digital advertising. He maintained an overweight rating, but lowered his price target to $ 29 from $ 30.
Management’s lack of details about the current third-quarter earnings and earnings guidance during a conference call with analysts Tuesday night weighed in on the views of several analysts. The “lukewarm outlook” led Wedbush Securities analyst Michael Pachter to retain a neutral rating and a $ 18 price target.
The cautious tone of the call, coupled with smooth international sales, led Guggenheim analyst Michael Morris to lower its Snap stock rating to neutral since the purchase, although it raised its target price to $ 22 from $ 18.
SunTrust analyst Robinson Humphrey Youssef Squali, while “incrementally positive” about Snap’s product roadmap and competitive position, is concerned about volatility around ad budgets in the United States and the “wobbly macro environment” ” It maintained a hold rating and pushed its target price to $ 25 from $ 24.
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