Snap Inc (NASDAQ:SNAP)’s first earnings release is set to come May 10th and will provide information that could set the precedent for investors in the coming years. To better understand what Snap’s earnings report say about its financial position, we examined the major indicators of Facebook Inc (FB) and Twitter Inc (TWTR)’s financial growth, including revenue, net income, user base, and common stock price, in the years following their IPO.
Metrics were taken from quarterly earnings reports and stock prices were recorded one day before the quarter’s earnings release, at close (the last possible point when the stock price would not be affected by the earnings release).
Facebook and Twitter both reported a revenue increase and user base growth one quarter after their IPO. Facebook’s revenue saw a 32% increase and its daily active users metric grew 32% to over half a billion (Table 1). Twitter’s growth was even more significant, more than doubling its revenue and growing its daily active users base 30%. However, both social media companies also saw significant losses in net income (Table 2). Based on these trends, we might expect that Snap will show increases in revenue and active users, but will not return a profit.
Here are all the ideas presented at the 2020 Robin Hood Investors Conference
As usual, the Robin Hood Investors Conference has brought several new investment ideas from some of the top minds in the wealth management business. Investors heard from Sachem Head's Barnes Hauptfuhrer, One Tusk Investment Partners' Vivian Lau, Lone Pine's Mala Gaonkar, Lakewood Capital's Anthony Bozza, CAS Investment Partners' Clifford Sosin, Teca Capital's Fernando Vigil and Read More
While both social media giants followed similar trends post-IPO, their paths have since differed significantly.
Since its IPO, Facebook has reported positive revenue growth (aside from the general Q1 slumps), positive daily active user growth each quarter, consistent profit, and soaring common stock prices. Twitter, on the other hand, has reported inconsistent revenue growth, stagnating user growth, consistent losses, and plummeting stock prices.
Even though Snap had a very successful IPO, with shares reaching 50% of original offers in the first day of trading, recent events places doubts on its sustainability. Instagram (now at 700 million monthly users) rolled out its own version of Snapchat Stories in August 2016 to the tune of over 200 million users (eclipsing Snapchat’s total users in just 8 months).
Due to better visibility and a variety of other usability factors, many Snapchat users and major social media influencers are migrating to and posting more now on Instagram. Facebook’s adoption of Stories should have investors worrying about how Snap can leverage the Stories feature that once made it so unique. Nonetheless, Snap still has a couple of tricks up its sleeve. Snapchat Spectacles, for example, is expected to be one of the biggest tech wearables in the coming years, and Snap’s incoming original content should be something to look forward to.