Snap () is expected to report results of its first quarter on Thursday, October 25, with a conference call scheduled for 5:30 pm EDT. What to watch for:
GUIDANCE THE BIGGEST UNKNOWN: BofA lowered the firm’s price target on Snap to $14 from $16, while keeping a Neutral rating on the shares. The firm expects a “modest beat” in Q1, aided by healthy advertising environment, but views Q2 revenue guidance as “the biggest unknown and the most important driver of post-call stock performance,” BofA tells investors in a preview note. In that regard, the firm views Meta’s () outlook as “likely resetting Snap bar” and is lowering its Q2 revenue and EBITDA estimates by 2%.While BofA remains on the sidelines on Snap given revenue volatility and long-term user monetization, it expects some stock support given historical P/S floor around 2.5-times forward revenues, and potential benefit from a TikTok ban.
INCREMENTAL POSITIVE BIAS: Roth MKM keeps a Neutral rating and $14 price target on Snap but notes that the firm has an “incremental positive bias” on the stock heading into Q1 earnings. The company’s upside Q2 EBITDA potential is driven by slowing AI/ML infrastructure spend and recent layoffs, while its North America daily active user metric should rise, the analyst tells investors in a research note. Snap’s improving brand advertising trends, likely Amazon.com () partnership contribution, and Snapchat+ traction also offers greater confidence in the near-term revenue outlook for the company, Roth MKM added.
MIXED SENTIMENT: Stifel lowered the firm’s price target on Snap to $12 from $14 earlier this month, keeping a Hold rating on the shares. Sentiment for the U.S. Internet group has been mixed since the start of 2024 and the firm’s thoughts at the start of Q1 earnings are “largely unchanged” as the advertising environment continues to improve, e-commerce continues to “hang in there,” and subscription names “remain a mixed bag.”
OUTLOOK: During the last earnings conference call, Snap said it saw Q1 revenue of $1.095B-$1.135B, with consensus at $1.12B.The company said, “As we enter Q1, we anticipate continued growth of our global community and, as a result, our guidance range is built on the assumption that DAU will be approximately 420 million in Q1. We are focused on executing against our roadmap to deliver improvements to our direct-response advertising platform to drive improved results for our advertising partners and accelerate topline growth. Our guidance range is for revenue of $1,095M to $1,135M, implying year-over-year revenue growth of 11% to 15%. Based on this revenue range and our investment plans for the quarter, we estimate that Adjusted EBITDA will be between negative $55M and negative $95M in Q1.”
