Snap Inc Q3 2017 Earnings Preview: Are Lowered Estimates Still Too High?

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The Snap Q3 2017 earnings report is set for release on Tuesday after closing bell, and the Street is looking for losses of 15 cents per share on $236.7 million in revenue. This will be the Snapchat parent’s third quarter as a public company. In the second quarter, the social media firm reported losses of 14 cents per share on $189.23 million in revenue.

Snap Q3 2017 earnings estimates have slid

SunTrust Robinson Humphrey analyst Youssef Squali reported in a Snap Q3 2017 earnings preview note that estimates for the company’s third quarter slid as the quarter went on. He explained that the lowered estimates reflect reduced growth potential for the company’s platform and lower short-term traction with advertisers set against “lofty” consensus estimates without guidance provided by the company.

He said the revenue consensus from FactSet slid from $276 million at the end of July to $244 million at the end of August and then to $237 million as of Nov. 3. He also observed a similar GAAP earnings per share trend as estimates slid from losses of 26 cents per share at the end of July to 29 cents per shar ein losses on Nov. 3.

He expects the pressure on ad prices seen during the second quarter to again be reflected in the third and fourth quarters. However, he adds that the pressure comes from Snap’s new self-serve ad and programmatic bidding platforms, which has driven growth in ad volume. However, he feels that the platforms are needed and will be good for the platform in the long term. He also noted that the third quarter likely benefited from demand from the Summer Olympics and Elections.

He maintained his Sell rating and $10 price target on Snap stock going into the company’s next earnings report.

Upside potential in Snap stock?

Drexel Hamilton analyst Brian White sees the potential for upside in Snap stock over the next 12 months. He said in his Snap Q3 2017 earnings preview note that the company has been growing “at a rapid pace” and continues to roll out new innovations and “compelling content” while also remaining “true to its core base of millennial followers.”

White has a Buy rating and $30 price target on Snap stock going into tonight’s earnings release, and he continues to see “strong upside potential” in the stock over the next 12 months. He notes that the company is still in the extreme early stages of development and thus issues no guidance, which he believes increases the risk for even greater volatility around its earnings reports.

For the Snap Q3 2017 earnings release, White is looking for global average revenue per user of $1.37, a 63% increase year over year. He’s expecting to see 178 million average daily active users, a 16% increase from a year ago. However, he sees this metric as being less relevant for Snap than it is for other social media firms.

For the fourth quarter, consensus indicates revenue of $305.4 million and losses of 14 cents per share. After sliding on Monday, the company’s stock surged by about 3% to $15.53 in the hours leading up to the Snap Q3 2017 earnings report.

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