Snap stock soars after Q2 forecast tops estimates

snap reporting first quarter results the social media company beating Wall Street estimates for the first quarter also the second quarter sales forecast topping estimates joining us now is third Bridge Global sector lead for technology media and Telecom Scott Kesler wo snap is volatile one Scott that's all I got to say I mean I feel like the whips off sort of quarter by quarter and not knowing what to expect so why why did they beat this quarter I guess I would ask because it has been pretty uneven here uh yeah I mean it has been a roller coaster to say the least um look this is a stock that was over $80 um during the height of covid uh in September of 2021 so even though we're seeing the stock up over 20% in after hours trading I mean I think it was over $16 just earlier this year so there's been a lot of volatility but I think most of it over the last few years has really been to the downside side what do they do right um in terms of q1 look it's really all been about um their kind of re-architecting um their advertising technology infrastructure to enable them to basically venture out and capitalize on e-commerce opportunities so direct response advertising has been kind of the buzzword of the buzz phrase that the company has been indicating for more than a year at this point and finally it seems like they are largely completed with the related work and obviously the uplift in in revenues um was significant 21% growth but when you look at what they delivered um the prior quarter or even what the expectations were for this quarter I mean that was a massive beat by all counts the question now is of course as we were just discussing how sustainable is what momentum they're trying to create um at this point is Scott I was looking at some of their numbers here so just for instance average revenue per user in North America $744 that's up from us the estimate was $78 and it's up 177% from a year ago so that's $744 in America Europe it's $24 rest of the world is a13 but the rest of the world is where they got most of their beat on um new users monthly active users daily active users just wondering in the adte scheme they're building up their adtech they're trying to monetize more is the game plan to in is to increase some of those average uh Revenue per user numbers around the world I mean that's the Hope right I mean essentially what and look this isn't an issue specific to snap I think what a lot of companies are finding is user growth is more possible outside of developed markets but on the other hand those markets are much harder to monetize and so that's kind of the tension that you see um in these constructs where the Paro principle is going to apply where you have 80% of uh say growth in users coming from overseas but maybe 80% of the revenue growth coming from the US and developed Market and so that's something that frankly companies are working on it's not an easy nut to crack to be honest and so it's going to require work but it it does seem like Snap finally is moving in the right direction um whether you look at the overall Revenue growth whether you look at the fact that they're attributing that to direct response and the Investments that I alluded to or the fact that uh just user gains now have um returned to the double digits you know all those things are encouraging I think a lot of folks as was alluded to earlier are wondering how sustainable some of this performance is going to be they alluded to what their expectations are for Q2 probably not quite as optimistic as the q1 numbers would suggest but perhaps they're just being conservative and I think it's fair to say that people should feel pretty good about the performance and the outlet Scott how much is the sustainability of the performance dependent on what happens with Tik Tock as well well the company touting the total time spent watching Spotlight which is its answer to Tik Tok was up 125% year-over year yeah well look I guess a couple things on that front I think Mark Zuckerberg was asked directly about this um yesterday in the context of the meta conference call and he said what I'm going to say it's kind of too early to tell we have no idea what's going to happen with Tik Tock um I think it's pretty clear that um their parent company is going to you know fight efforts to ban it in the US that makes a lot of sense um but there are so many unknowns here nonetheless I think at the least what's going on potentially with Tik Tock is I think rightly seen as a potential positive uh for snap I do kind of Wonder though um whether or not the as I said the performance here um is sustainable if they have this kind of positive momentum or if expectations are going to get you know too optimistic and there are other issues that the company has to deal with we've heard repeatedly from experts that snap is in a tough spot this is a company that uh is oriented around you know kind of protecting privacy and personal data and brand advertising and that's not where the world is right now it's why performance advertising is so important it's why they've been working on this for the past last year I'm just not entirely sure um that snap has all that uh they need to have at this point to really be successful over the longer term in this context I guess we'll find out you know over the next couple of quarters but this is a pretty good start to the year for sure it's been a comeback story before we'll have to see if it is again Scott Kesler thank you

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Length: 6min 21sec (381 seconds)

Published: Thu Apr 25 2024