Snap plunges 30% after earnings

Snap (SNAP.US), US social networking company, is plunging over 30% in premarket today. Sell-off was triggered by the release of the Q4 2023 earnings report yesterday after the close of the Wall Street session. Q4 earnings were mixed with sales disappointing and earnings beating expectations. However, the company also issued a lackluster guidance for Q1 2024.

Snap sales disappoint, earnings beat expectations

Q4 2023 results from Snap can be best described as mixed. Company reported weaker than expected sales for the quarter. While North America revenue was higher than expected, sales in Europe and the rest of the world missed expectations. Situation looked completely different when it came to the number of daily active users - North America missed expectations, while Europe and the rest of the world saw higher than expected user growth. Profits turned out to be better-than-expected, but much lower year-over-year.

Earnings from Amazon and Meta Platforms, which showed improvements in ad revenue, caused expectations for Snap revenue to be high going into Q4 2023 release. Failure to show similarly strong results as well as muted growth in North America user base are weighing on the share price today. While user growth in Europe and the rest of the world surprised to the upside, Snap generates much higher revenue per user in North America.

Q4 2023 results

• Revenue: $1.36 billion vs $1.38 billion expected (+4.7% YoY)
  • North America: $899.5 million vs $875.9 million expected (+2.2% YoY)
  • Europe: $238.3 million vs $245.1 million expected (+9% YoY)
  • Rest of the world: $223.5 million vs $249.6 million expected (+11% YoY)
• Daily active users: 414 million vs 411.6 million expected (+10% YoY)
  • North America: 100 million vs 101.8 million expected (0.0% YoY)
  • Europe: 96 million vs 95.91 million expected (+4.3% YoY)
  • Rest of the world: 218 million vs 214.8 million expected (+19% YoY)
• Average revenue per user: $3.29 vs 3.33 expected (-5.2% YoY)
  • North America: $8.96 vs $8.63 expected (+2.2% YoY)
  • Europe: $2.49 vs $2.55 expected (+4.6% YoY)
  • Rest of the world: $1.03 vs $1.17 expected (-6.4% YoY)
• Adjusted EBITDA: $159.1 million vs $111.8 million expected (-32% YoY)
• Adjusted net income: $127.9 million vs $106.4 million expected (-40.4% YoY)
• Adjusted EPS: $0.08 vs $0.06 expected ($0.14 a year ago)
• Free cash flow: $110.9 million vs $82 million expected (+41% YoY)

Q1 forecast disappoints

Forecast issued by Snap for the first quarter of 2024 turned out to be a disappointment. While company's revenue guidance came in more-or-less in-line with market expectations, profits forecast was weaker-than-expected, with adjusted EBITDA loss guidance pointing to a twice as deep loss as the market expected. 

Q1 2024 forecast

• Revenue: $1.10-1.14 billion vs $1.11 billion expected
• Adjusted EBITDA loss: $55-95 million vs -$32.7 million expected
• Daily active users: 'about 420 million' vs 418.5 million expected

A look at the chart

Taking a look at Snap chart (SNAP.US) at D1 interval, we can see that the stock started to trade sideways following an over-100% rally that took place between late-September and late-December 2023. Share price moves have been limited to the $15.25-17.50 range over the past month and a half. However, this period of range trading will end today with current pre-market quote being $11.89 per share, or over 30% below yesterday's cash close! This also means that bears may attempt to push the stock below $11.75 support zone during today's Wall Street session.

Source: xStation5