While Snap (NYSE:SNAP) shares initially soared as much as 20% in after-hours trading following the company’s Q3 results, they were relatively flat in pre-market Wednesday trade following cautious commentary during the earnings call.
EPS of $0.02 came in better than the consensus estimate of ($0.24). Revenue grew 5% year-over-year to $1.19 billion, beating the consensus estimate of $1.11B.
DAUs (daily active users) increased by 43 million (or 12% year-over-year) to 406M. Total time spent watching Spotlight increased over 200% year-over-year.
Heading into Q4, the company expects continued growth in its global community and, as a result, its financial forecast for Q4 is built on the assumption that DAU will reach 410M to 412M. For Q4, management sees revenue at $1.32-$1.375B, implying year-over-year revenue growth of 2%-6%. Street estimates stood at $1.33B.
Furthermore, the company announced that its board of directors authorized a stock buyback program of up to $500M of its Class A common stock.
However, the stock pared all gains after the management said it has been closely observing a slowdown in spending, particularly from a significant number of brand-oriented advertising campaigns, immediately following the start of the conflict in the Middle East.
This slowdown in ad spending is impacting the company's sales for the current quarter, they said.
"Elements of how advertiser efforts continue to scale (and a potential output of improved revenue growth in ’24) remains an open question coming out of this earnings report & will remain a proof point part of the company narrative in terms of broader advertiser industry checks and budget elements in coming months/quarters," commented Goldman Sachs (NYSE:GS) analysts.
Bernstein analysts believe the Snap story is "complicated".
"It's difficult to describe Snap in any other way right now with enough mixed data points to leave our heads spinning. The good news is revenue growth and Adj. EBITDA were back in the black — the step forward. But then Q4 non-guidance guidance (we're back to that) showed limited acceleration given macro-driven recent ad pauses, that are no longer paused, but could get paused again."
"We understand the weight of macro uncertainty and previous guidance pulls, but without a guide, it's hard for investors to underwrite. We stay paused on the stock," analysts added.
Additional reporting by Senad Karaahmetovic