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Snap Shares Slump on Weak Q3 Outlook: ETFs in Focus
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Snap (SNAP - Free Report) , known for its mobile camera communication application Snapchat, reported second-quarter 2020 loss of 9 cents per share, which matched the Zacks Consensus Estimate but was wider than the year-ago quarter’s loss of 6 cents. Revenues increased 17% from the year-ago quarter to $454.2 million, beating the consensus mark by 1.8%.
Snap incurred higher interest expense related to convertible notes, a one-time gain from selling Placed (a location-based user data provider) in the prior-year quarter and long-term investments in community building and advertising partners responsible for its higher losses this quarter, per CNBC. Shares slumped 6.2% on Jul 22, reflecting the results and a slightly pessimistic guidance.
Snap Chief Financial Officer Derek Andersen said “at the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate. This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”
Inside the Earnings Details
Daily active users (DAU) at the end of the reported quarter were 238 million. Snap added 35 million DAU on a year-over-year basis and 9 million, sequentially. This growth was broad based with year-over-year and sequential growth in both iOS and Android platforms.
Geographically, revenues from North America (67.5% of revenues) increased 18% year over year to $306.7 million. Revenues from Europe (17.3%) jumped 29.7% to $78.6 million. Rest of the World (ROW) revenues were $68.8 million, up 2.1% year over year.
Average revenue per user (ARPU) remained flat year over year. On a year-over-year basis, North America and Europe ARPUs increased 8.3% and 15.8%, respectively, while and ROW declined 25.8%.
Slightly Downbeat Guidance
The company said that so far this quarter, revenues are up 32% year over year, but expects this momentum to moderate through the rest of the quarter, ending up with growth of around 20%.
“Advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialize in the same way they have in prior years, including the back to school season, film release schedules, and the operations of various sports leagues,” Andersen said.
“At this point in time it is difficult to predict how these factors may impact advertising demand in the remainder of Q3.” Snap expects DAU between 242 million and 244 million in the third quarter of 2020, implying year-over-year growth of 15% to 16% or 32 to 34 million daily active users.
Moreover, total costs (including cost of revenues and operating expense) are expected to grow at percentage rates in the low to mid 20s year over year. Such a depressing outlook was enough to hit Snap shares hard post earnings.
ETFs in Focus
Snap’s presence in Global X Social Media Index ETF (SOCL - Free Report) (the stock takes about 7.36% of the fund), Invesco Dynamic Software ETF (5.88%) and Innovator Loup Frontier Tech ETF (LOUP - Free Report) (3.42%) put these tech-related ETFs in great focus. While Snap’s own stock performance will regulate these funds, its guidance hints at the upcoming trend of user and subscriber growth of its peer tech companies.
Image: Bigstock
Snap Shares Slump on Weak Q3 Outlook: ETFs in Focus
Snap (SNAP - Free Report) , known for its mobile camera communication application Snapchat, reported second-quarter 2020 loss of 9 cents per share, which matched the Zacks Consensus Estimate but was wider than the year-ago quarter’s loss of 6 cents. Revenues increased 17% from the year-ago quarter to $454.2 million, beating the consensus mark by 1.8%.
Snap incurred higher interest expense related to convertible notes, a one-time gain from selling Placed (a location-based user data provider) in the prior-year quarter and long-term investments in community building and advertising partners responsible for its higher losses this quarter, per CNBC. Shares slumped 6.2% on Jul 22, reflecting the results and a slightly pessimistic guidance.
Snap Chief Financial Officer Derek Andersen said “at the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate. This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”
Inside the Earnings Details
Daily active users (DAU) at the end of the reported quarter were 238 million. Snap added 35 million DAU on a year-over-year basis and 9 million, sequentially. This growth was broad based with year-over-year and sequential growth in both iOS and Android platforms.
Geographically, revenues from North America (67.5% of revenues) increased 18% year over year to $306.7 million. Revenues from Europe (17.3%) jumped 29.7% to $78.6 million. Rest of the World (ROW) revenues were $68.8 million, up 2.1% year over year.
Average revenue per user (ARPU) remained flat year over year. On a year-over-year basis, North America and Europe ARPUs increased 8.3% and 15.8%, respectively, while and ROW declined 25.8%.
Slightly Downbeat Guidance
The company said that so far this quarter, revenues are up 32% year over year, but expects this momentum to moderate through the rest of the quarter, ending up with growth of around 20%.
“Advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialize in the same way they have in prior years, including the back to school season, film release schedules, and the operations of various sports leagues,” Andersen said.
“At this point in time it is difficult to predict how these factors may impact advertising demand in the remainder of Q3.” Snap expects DAU between 242 million and 244 million in the third quarter of 2020, implying year-over-year growth of 15% to 16% or 32 to 34 million daily active users.
Moreover, total costs (including cost of revenues and operating expense) are expected to grow at percentage rates in the low to mid 20s year over year. Such a depressing outlook was enough to hit Snap shares hard post earnings.
ETFs in Focus
Snap’s presence in Global X Social Media Index ETF (SOCL - Free Report) (the stock takes about 7.36% of the fund), Invesco Dynamic Software ETF (5.88%) and Innovator Loup Frontier Tech ETF (LOUP - Free Report) (3.42%) put these tech-related ETFs in great focus. While Snap’s own stock performance will regulate these funds, its guidance hints at the upcoming trend of user and subscriber growth of its peer tech companies.
Notably, Netflix (NFLX - Free Report) , the famous video streaming company, also disappointed investors with its second-quarter results due to weak subscriber outlook (read: ETFs to Watch as Netflix Drops on Weak Subscriber Outlook).
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