- Shares of Snap jumped as much as 17% after the company reported second-quarter earnings and user growth that handily beat Wall Street expectations.
- The company reported that its flagship product, Snapchat, added 13 million daily active users in the second quarter across both major mobile operating systems and throughout several geographic regions.
- Here’s what Wall Street is saying about Snap’s strong second quarter.
- Watch Snap trade live.
Snap, the company behind Snapchat, posted strong second-quarter results, sending shares soaring as much as 17% on Wednesday.
The stock jumped after Snap exceeded Wall Street estimates for major metrics including revenue, daily active users, and earnings per share.
Revenue grew by 48% from the same period last year to $388 million, beat expectations of $359.77 million. Snap also reported a loss-per-share of $0.06, outperforming forcasts of $0.10.
The company added 13 million daily active users in the second quarter, reflecting the biggest increase since 2016, and the number of Snap’s created every daw topped 3.5 billion. According to chief executive officer Evan Spiegel, 75% of Americans between the ages 13 and 34 are now active on Snapchat.
Over the last few months, Snapchat unveiled new gender and age-changing filters that helped boost user engagement metrics, in addition to overhauling its Android app that was previously prone to freezing, lagging, and crashing.
Snapchat also saw significant improvement in its advertising business after releasing improvements to its mobile ad unit and creating a self-monetization platform.
“We believe the single biggest driver for our revenue in the short to medium term will be increasing the number of active advertisers using Snapchat,” Jeremi Gorman, the chief business officer of Snap said in a prepared statement. “We are making consistent improvements and investments across our products, tools, and sales teams to grow advertiser demand.”
As Snap continues to turn around its business, its stock price is following suit. Shares are up more than 200% this year, and several Wall Street firms increased price targets and ratings for the company followings its most recent earnings.
Here’s what Wall Street is saying about Snap’s impressive second-quarter results:
Goldman Sachs: “We believe the biggest opportunity for further outperformance at Snap remains in the company’s monetization.”
Price target: Increased to $20, from $18
“Our checks continue to suggest increasing momentum with advertisers driven by improvements to Snap’s ad tech capabilities, the Shopify integration, and growth in content consumption,” a team of analysts led by Health Terry wrote in a research note on Wednesday.
The continued: “We expect this will continue to drive both growth and profitability above management’s guidance and market expectations for the foreseeable future.”
Credit Suisse: “Premium content we submit will only serve to raise the ceiling on ad load.”
Price target: Increased to $20, from $18
“Once again growth in ad impressions (+122% per DAU) as Snap raised ad loads was the primary driver in the acceleration of revenue,” analyst Stephen Ju said in a research note to clients on Thursday.
He continued: “Better-than-expected sequential DAU additions at +13mm, higher user engagement on an improved app, as well as premium content we submit will only serve to raise the ceiling on ad load, which as we have previously noted remains a long way away.”
RBC: ‘We see fundamental trends as largely confirming our April 5th upgrade.’
Price target: Increased to $20, from $17
“Key drivers have been/are: necessary Android platform improvements, ongoing product improvements (AR Filters, Discover tab UI, and Games – Bitmoji Tennis is our fave), the successful development of a self-serve advertising platform, improved management execution, and secular tailwinds,” Mark Mahaney, an analyst, said in a note to clients on Wednesday.
He added: “The biz model is at a clear inflection point – and 50%ish organic revenue growth is rare air, even in Net land. No, we don’t think this is all in the numbers – either in the Fundamentals or in the Stock Price.”
Cowen: ‘We see 3Q19 earnings as a near-term catalyst for shares.’
Price target: Increased to $16, from $12
Rating: Market perform
“Per our recent ad buyer survey, SNAP was lowest Social platform in key attributes like ROI, and performed poorly in data and user targeting,” a team of analysts led by John Blackledge said in a research report to clients on Wednesday.
They added: “While we expect Daily Active Users to grow 6% annually ’19-’24 coupled with rising advertising monetization of the platform to drive revenue growth and higher incremental margins over time, our estimates are below consensus.”
Guggenheim: “Snap continues to drive operational improvements in 2019 as it
improved 2Q metrics.”
Price target: NA
“We believe the company must continue to scale internationally (while controlling content, infrastructure costs) to reach sustained profitability,” analyst Michael Morris said in a note to clients on Wednesday.
He continued: “Further, we think balancing monetization (i.e., ad loads across pages within Discover, Stories and Shows) without compromising the user experience remains inherently challenging.”
Needham & Company: “SNAP has been trying to broaden its appeal, but so far that has proven more difficult than projected.”
Price target: NA
“As SNAP adds content that attracts older users, that same content drives defections of younger users,” analyst Laura Martin said in a note to clients on Thursday.
She added: “By implication, SNAP must invest in its targeting abilities so it can send content to older users that are largely different from younger users, or risk churn rising.
“We believe that SNAP must raise capital over the next 12 months, which we believe creates an overhang for its share price.”