SNAP Sees Consensus Price Target To $12.47 After Q3 Results

Snap Inc (NYSE: SNAP) on Friday reported its third-quarter financial results. The company announced revenues grew to $1.13 billion, increasing 6% yearly, the slowest it’s ever grown revenues in the company’s history being public. In their investor letter, they say that the quarter was shrouded in “significant headwinds” but re-affirmed investors that they will be able to be successful in this new operating environment.

Later in the investor letter, they brace investors by saying, “We expect that the operating environment will continue to be challenging in the months ahead.”

The company reported an operating loss of $435 million, which is more than double what they lost in 2021 during the same time. Net losses also went the same way as operating losses, rising to -$359.5 million, almost losing six times as much as it lost in 2021.

The company reported a positive adjusted EBITDA of $72.64 billion, down almost 60% yearly. Similar things happened to the company’s operating cash flow and free cash flow, which saw a significant decrease to $55.9 billion and $18.1 million, respectively.

Daily active users grew to 363 million during the third quarter of the year, an increase of 57 million, or 19% year over year. The company noted that daily active users increased sequentially in North America, Europe, and the Rest of the World but did not quantify the amounts. They add that the time spent watching Spotlight content grew 55% yearly.

Lastly, the company decided not to provide guidance for the fourth quarter, citing, “uncertainties related to the operating environment.”

Analysts covering Snap stock lowered their long-term price targets on the stock, dropping the average 12-month price target to $12.47 from $15.86 a day before the results. There are currently 43 analysts covering the stock, with three analysts having strong buy ratings, eight have buy ratings, 29 analysts have hold ratings, and the last three analysts have sell ratings on the stock. The street-high price target sits at $42.

In Canaccord Genuity Capital Markets’ note on the results, they reiterate their hold rating on the stock and lower their 12-month price target to US$12 to US$16. They say multiple headwinds contributed to the weak quarterly results, specifically pointing to privacy changes and inflation impacting advertisers’ spending on the platform. At the same time, “competition continues to serve as a headwind to engagement.”

On the results, revenues of $1.13 billion came in slightly below Canaccord’s estimates. At the same time, the company saw a sequential deceleration across both direct response and brand advertising. On a positive note SNAP’s adjusted EBITDA came in ahead of Canaccord’s estimate, and they note that operating costs declining 8% sequentially showcases that real progress is being made after announcing the 20% workforce reduction and investment optimization in September.

On the daily active user growth, Canaccord says that the addition of 16 million users in the third quarter put SNAP “well ahead of guidance,” but notes that engagement with Friend Stories has slowed and is now creating a headwind to the overall time spent watching content.

Lastly, Canaccord says that all these macro headwinds continue to create uncertainty and limit the company’s view even in the near term. They say that though the company did not provide formal top-line guidance, the management expects year-over-year revenue to decelerate and end up roughly flat by the end of the year.

Below you can see Canaccord’s updated estimates.

Information for this briefing was found via Edgar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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