The social media-style firm Snap (SNAP) is scheduled to report third-quarter 2022 earnings on October 21.
Over the past year, shares of the company jumped almost 169%, and are now trading at over $76. A solid Q3 result might propel the stock price upward, so let’s take a closer look at what analysts on the Street are expecting.
Analysts, on average, expect Snap to post earnings of $0.08 per share and revenues of $1.10 billion for Q3.
Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $0.12 per share. (See SNAP Dividend Date and History on TipRanks)
Snap’s Prior Quarter Snapshot
Snapchat had a record-breaking second quarter, thanks to increased revenue and daily active users (DAU).
Revenues were $982 million, a 116% increase over the year-ago quarter and well above the Street’s expectation of $845 million.
Meanwhile, earnings came in at $0.10 per share, surpassing expectations of a $0.01 loss per share. The company recorded a loss of $0.09 per share in the year-ago quarter.
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Factors to Note
Snapchat, Snap’s flagship product, is a popular smartphone app with millions of users. Over the past couple of years, the company’s user base has grown at a faster rate, helping the company to expand its top-line growth.
The DAU, which rose 23% year-over-year to 293 million, was a major takeaway from Snap’s last quarter statistics. In the third quarter, Snapchat’s rising popularity should continue to drive DAU growth.
Another important metric is the average revenue per user (ARPU), which rose 76% year-over-year in Q2. This number is expected to climb as Snapchat widens its attention to higher-age populations, resulting in more revenue in the future.
Other positives include Snap’s collaborations, augmented reality (AR) developments, and other attempts to improve its digital platform. Snapchat has been introducing new features such as Lens Studio 2.0, Camera Kit, Snap Minis, and 3D Bitmoji, which are drawing users and advertisers alike.
Apart from the aforementioned factors, Snap’s continuing investments in the Discover platform, as well as a steady ad-spending environment, should continue to pay off.
Given the company’s increased digital investment and the introduction of new creative products, it will be fascinating to see if Snap can boost DAU and ARPU growth in the following quarter and impress investors.
Analyst Recommendations
Ahead of the third-quarter earnings announcement, Cowen analyst John Blackledge reiterated a Buy rating on the stock and a price target of $96.00. This implies 25.6% upside potential to current levels.
Snap is expected to see strong revenue growth in the coming quarter, thanks to “rising ARPU from pricing gains and user growth,” according to Blackledge.
He stated, “We remain bullish on SNAP shares as we expect continued robust ARPU growth due to attractive ROAS (Return On Ad Spend) for advertisers coupled with strong user engagement, a growing numbers of features, and low relative ARPU compared to other Social players.”
On TipRanks, Snap stock commands a Strong Buy consensus rating, based on 27 Buys, 6 Holds, and 1 Sell. As for price targets, the average SNAP price target of $88.23 implies 15.4% upside potential from the current levels.
Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.
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