Snap earnings forecast gloomy week for Big Tech
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Shares in Snap Inc. fell more than 13% in after-hours trading Tuesday, after the company said it missed Wall Street expectations for revenue growth in the fourth quarter and offered a somewhat bleak outlook for the current quarter.
Why it matters: Snap typically serves as a bellwether for other ad-supported internet stocks, like Meta and Pinterest, which are scheduled to report earnings in the next week.
- Both those stocks took a small hit in after-hours trading Tuesday.
What's next: While Snap didn‘t issue any official revenue guidance for the first quarter of 2023, it said it's internally forecasting a year-over-year revenue decline for Q1.
Details: In a letter to investors, Snap acknowledged that 2022 was a challenging year, due to macroeconomic factors, increased competition and "platform changes."
- That language presumably refers to competition from TikTok and changes in Apple’s app tracking policies that made it harder for advertisers to target ads on apps like Snap.
- The company grew revenues only slightly last quarter compared to the same quarter in 2021. But for the whole year, a healthier ad market in the beginning of 2022 led to an overall revenue increase of 12% in 2022 over 2021.
Be smart: Snap continued to cite weakness in demand for brand advertising, or TV-like ads that help companies tout their reputation. That business declined 11% last quarter compared to the same quarter in 2021.
- Brand advertising is typically the first type of marketing spend that companies cut in tough economic times.
- Direct response ads, on the other hand, fared better, increasing 4% year-over-year last quarter. Snap touted continued improvements in the company’s direct response ad technology as a point of optimism moving forward.
By the numbers, via CNBC:
- Earnings per share: $0.14, adjusted, versus $0.11 expected, according to a Refinitiv survey of analysts.
- Revenue: $1.30 billion versus $1.31 billion expected, according to Refinitiv.
- Global Daily Active Users (DAUs): 375 million versus 375.3 million expected, according to StreetAccount.
- Average revenue per user: $3.47 versus $3.49 expected, according to StreetAccount.
The big picture: Snap’s total users are expected to continue growing faster than its revenues in the next quarter.
- The company projects it will add between 7 and 9 million daily active users in Q1 2023, while the operating environment ”remains challenging” on the monetization side.
