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Snap (SNAP) to Report Q2 Earnings: What's in the Cards?

Snap SNAP is set to report second-quarter 2020 results on Jul 21.

The Zacks Consensus Estimate for revenues is currently pegged at $430.1 million, indicating a 12.1% growth from the year-ago quarter’s reported figure.

Notably, in the last-reported quarter, Snap’s subscriber growth reflected by Daily Active Users (DAUs) increased 39 million on a year-over-year basis and 11 million sequentially. DAUs are expected to be 239 million, in line with the Zacks Consensus Estimate. The company expects DAUs to increase 18% rise year over year for the second quarter.

Meanwhile, the consensus mark for loss has narrowed by a penny to 10 cents per share in the past 30 days.

Snap Inc. Price and EPS Surprise

 

Snap Inc. Price and EPS Surprise

Snap Inc. price-eps-surprise | Snap Inc. Quote

Snap’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing in one, with the average surprise being 15.2%.

Let’s see how things are shaping up for the upcoming announcement.

Factors to Influence Q2 Results

Snap is benefiting from a spike in usage of Snapchat. The company’s focus on continuously adding a set of innovative features like Lens Studio 2.0, Camera Kit, Snap Minis and Bitmoji for Games is making Snapchat more attractive for users and advertisers.

Apart from strong adoption of AR Lenses, Discover content and Shows are expected to have driven user growth amid the coronavirus-led global lockdowns and shelter-in-home guidelines.

The growing adoption of Snapchat among Gen Z (13-24 years) is expected to have driven DAUs. Markedly, it is a larger platform than Facebook FB, Instagram and Twitter TWTR among this demography.

However, bleak ad-spending environment due to the pandemic is expected to have negatively impacted Snap’s second-quarter top-line growth.

Notably, advertising is Snap’s only source of revenues and this Zacks Rank #2 (Buy) company faces significant competition from the likes of Twitter, Facebook, Google and Pinterest PINS for ad dollars. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, a persistent decline in price per ad impression is likely to have hurt advertising revenues.

Markedly, ARPU increased 20.2% year over year in first-quarter 2020. However, ARPU is expected to have declined in the second-quarter 2020. The Zacks Consensus Estimate for second-quarter ARPU is pegged at $1.76, suggesting a decline of 7.9% from the year-ago quarter’s reported figure.

Further, higher spending on content, sales and marketing are a few lingering overhangs on profitability. Hence, Snap’s second-quarter bottom-line results are expected to reflect the negative impact of rising expenses.


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