Snap Inc. (NYSE: SNAP) witnessed a significant upswing in its shares, with an initial after-hours spike of up to 20% following the company’s Q3 results. However, in pre-market trading on Wednesday, Snap’s shares remained relatively flat due to cautious remarks made during the earnings call.
The company reported earnings per share (EPS) of $0.02, surpassing the consensus estimate of ($0.24). Revenue experienced a 5% year-over-year growth, reaching $1.19 billion, which outperformed the consensus estimate of $1.11 billion.
Snap’s daily active users (DAUs) increased by 43 million, marking a 12% year-over-year growth, reaching a total of 406 million. The time spent watching Snap’s feature “Spotlight” surged by over 200% compared to the previous year.
Heading into Q4, Snap foresees continued growth in its global community, with expectations that DAU will reach 410 million to 412 million. For Q4, the company provided revenue guidance in the range of $1.32 billion to $1.375 billion, implying a year-over-year revenue growth of 2% to 6%. Street estimates were around $1.33 billion.
Additionally, Snap announced its board of directors’ approval of a stock buyback program, allowing the repurchase of up to $500 million worth of its Class A common stock.
Despite the initial positive reaction in the stock price, the gains were erased when Snap’s management reported closely monitoring a slowdown in advertising spending. This slowdown, particularly from brand-oriented advertising campaigns, was observed immediately following the onset of the conflict in the Middle East. It has had an impact on the company’s sales for the current quarter.
Goldman Sachs analysts noted that the future trajectory of advertiser efforts and the potential for improved revenue growth in 2024 remain uncertain. This uncertainty will be a focal point of the company’s narrative, contingent on broader checks within the advertising industry and budget considerations in the coming months and quarters.
Bernstein analysts described Snap’s story as “complicated” due to mixed data points. While revenue growth and adjusted EBITDA displayed positive signs, the analysts pointed to the lack of clear guidance for Q4, which raised concerns. The recent ad pauses, affected by macroeconomic factors and external events, added further complexity to the situation.
The analysts indicated that they are currently taking a cautious stance on Snap’s stock.