stocks fall on lower margin forecasts

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Snap announced its third quarter results on October 21. Revenue increased 57% to $ 1.1 billion, reflecting growth in the number of users outside of Europe and North America, as well as an increase in average revenue per user (ARPU) in these more developed markets.

Despite the revenue growth, the group recorded an 8% increase in operating losses, to $ 180.8 million. This reflects the continued investments, as well as the return of travel and event costs that disappeared during the pandemic.

The group updated its guidance for fourth-quarter revenue to around $ 1.2 billion, with underlying cash profits ranging between $ 135 million and $ 175 million. This implies a profit margin of no more than 15% and perhaps as low as 11.2%, a significant drop from the 18% achieved in the same period last year.

The stock fell 26.6% the day after the announcement.

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Third Quarter Results

Snap reported 306 million Daily Active Users (DAUs) in the third quarter, a 23% increase year-over-year. This was driven by growth in the rest of the world, up 49% to 130 million, although North America and Europe also posted positive progress.

ARPU rose 28% to $ 3.49, with very strong growth in North America, up 49% to $ 8.20, and in Europe, up 34% to $ 1.92. The rest of the world ARPU is $ 0.98.

Operating costs increased 47.5% to $ 1.2 billion, with significant increases in research and development and sales and marketing.

The group said free cash flow in the half of $ 51.7 million, a significant improvement from the outflows of $ 69.6 million reported a year ago. However, that excludes, among other things, $ 300.9 million in stock-based compensation paid to staff. Global stocks outstanding, including payments based on underlying stocks, rose 4.6% year-on-year.

The group’s net cash position at the end of the quarter was $ 1.2 billion, up from $ 862 million a year ago.

Highlights

  • Price / earnings ratio (next 12 months): 91.9
  • Average price / earnings ratio since enrollment: 194.1
  • Potential dividend yield (next 12 months): 0.0%

All ratios are from Refinitiv. Remember that returns are variable and are not a reliable indicator of future income. Keep in mind that the key figures shouldn’t be considered in isolation – it’s important to understand the big picture.

Learn more about Snap stocks, including how to invest.

This article is original content from Hargreaves Lansdown, published by Hargreaves Lansdown. Unless otherwise stated, estimates, including potential returns, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Returns are variable and not guaranteed. The value of investments goes up and down, so investors could suffer a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No opinion is given on the current or future value or price of an investment, and investors should form their own opinion on any proposed investment. This article has not been prepared in accordance with legal requirements to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting pre-research transactions, but HL has controls (including transaction restrictions, physical and information barriers) in place to manage conflicts of interest. potential interests presented by such a transaction. Please see our full non-independent research for more information.

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