SNAP Earnings Preview: Wedbush Trims Estimates, Reiterates Neutral on the Stock

Most of the major players in the social media market have come and gone this earnings season. It’s now Snap’s (NYSE:SNAP) turn in the earnings confessional. Snap will report second-quarter results after the market close on Tuesday, August 7.

Wall Street doesn’t like Snap, that much is clear. Despite Snap’s dominance in the next generation of social media users, investors remain uncertain about the company’s revenue streams.

Indeed, Wedbush analyst Michael Pachter believes Snapchat remains one of the most difficult-to-use social platforms for advertisers. The company’s economic losses are likely to exceed $1 billion this year, with no clear path to profitability.

Ahead of Tuesday’s big event, Pachter shares his expectations: “Our estimates are for revenue of $245 million, down from $261 million previously, and a loss per share of $(0.17), down from a loss per share of $(0.16) previously. Our updated estimates compare to consensus of $251 million and $(0.17). Our updated estimates reflect y-o-y revenue growth of 35% (down from last quarter’s 54% growth, and growth in Q2:17 of 153%), and total sequential DAU growth of only 1 million (vs. our prior estimate for 5 million, and down slightly from last quarter’s DAU growth of 4 million), reflecting flat DAU growth in both North America and Europe, with 1 million DAU growth in Rest of World. We expect total ARPU of $1.27 in Q2, versus $1.21 last quarter, and $1.05 in Q2:17.”

Net net, Pachter reiterates a Neutral rating on Snap stock, with a price target of $10, which represents a potential downside of 22% from where the stock is currently trading. (To watch Pachter’s track record, click here)

TipRanks suggests caution has a slight grip on Wall Street analysts surveying the social media giant. Out of 11 analysts polled in the last 3 months, the battle between the bulls and the bears appears evenly split- with 2 bulls betting on SNAP stock, 7 analysts hedging their bet, and 2 bears running for the hills. However, target expectations appear to have more apprehension baked into expectations. The 12-month average price target stands at $12.00 marking nearly 6% in downside potential from where the stock is currently trading.


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