Snap (SNAP) Stock Just Crashed 25% Following Earnings, Analyst Reaction Mixed

October 21, 2021 4:36 PM EDT
Get Alerts SNAP Hot Sheet
Price: $49.02 -1.29%

Rating Summary:
    41 Buy, 14 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 2 | New: 5
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Snap (NYSE: SNAP) stock is trading sharply lower after hours Thursday after the social media company reported mixed Q3 results and offered disappointing guidance.

Snap earned $0.17 per share to top the analyst estimate of $0.08. Sales for the quarter came in at $1.07 billion to miss on the consensus of $1.1 billion.

Sales grew 57% year-over-year thanks to 306 million active global users, higher than the 301.8 million expected from the Street. Finally, the average revenue per user (ARPU) came in at $3.49 vs. $3.67 consensus.

“While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS,” CEO Spiegel said.

The SNAP stock was further hit after the company said it expects to generate sales between $1.17 billion and $1.21 billion, significantly lower than the consensus of $1.36 billion. The company is expecting to record adjusted EBITDA between $135 million and $175 million.

Earlier this week, BofA analyst Justin Post reiterated a Buy rating and $80.00 price target on the Snap stock on expectations the company will report 3Q revenue upside.

“With tougher comps for the sector in 4Q (10pt tougher y/y growth comp for Snap) and 1H’22, near-term deceleration may be a sentiment headwind, so commentary around Spotlight & Maps monetization and potential to maintain 50%+ growth in 2022 is important for the call,” the analyst commented in a note.

Prior to the sharp move lower in the Snap stock, shares were up 51.5% YTD.

Raymond James analyst Aaron Kessler reiterated a Market Perform rating on the Snap stock.

“While user trends remain solid, and we not believe the iOS changes fundamentally alter the company’s long-term ad value proposition, we maintain our Market Perform rating as we believe that the iOS impacts are not likely to immediately resolve, preventing the company from reaching its goal of 50% annual revenue growth in the near term. We view risk/reward as fairly balanced at current levels of ~18x our 2022 revenue estimates based on after-hours trading levels, vs. 6x/12x for FB/TWTR),” the analyst said in a client note.

Credit Suisse analyst Stephen Ju reiterated an Outperform rating and lowered the price target to $104.00 per share from $111.00.

The analyst believes 3Q challenges (IDFA and supply chain) will prove to be transitory as “advertisers progressively adopt new tools to more accurately measure events in a post-IDFA world and also as issues such as port congestion and labor shortages revert back to prepandemic levels.”

“We do not believe that the value Snap generates for marketers has changed, and we are buyers of SNAP shares into the weakness, as advertisers make adjustments to assign proper attribution. Despite these near term headwinds, the ongoing eCPM increases (+62% in 3Q21) extend the durability of Snap’s long term revenue growth, particularly as ongoing ad load hikes into perpetuity are unsustainable. Further, as Snap’s growth expectations do not include monetization of the other parts of the Action Bar, this brings even more optionality to our thesis. Our PT decreases to $104 (vs prior $111) on lower estimates for 4Q21/2022 and beyond, and we maintain our Outperform rating on the following: 1) potential for better-than-expected DAU growth with a revamped Android app released in more geographies, 2) potential for better-than-expected ad revenue on ramping product rollouts and marketer adoption, 3) monetization optionality from increased engagement from Games, Maps, and longer term Spotlight,” Ju wrote in a client note.

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