Snap Inc. is gearing up to release its second-quarter 2024 results in early August . Thus, for the 2nd quarter of 2024, Snap anticipates total revenues to be between $1.225 billion and $1.255 billion. The company also predicts its adjusted EBITDA to range from 15 million to 45 million dollars.
The Zacks Consensus Estimate projects revenues at $1.25 billion, marking a significant 17.35 percent boost from the same quarter last year. Meanwhile, the consensus estimate for earnings remains steady at 2 cents per share over the last month.
SNAP outperformed
Notably, Snap has consistently outperformed the Zacks Consensus Estimate for earnings in each of the last four quarters, with an impressive average earnings surprise of 93.57%. As we approach the earnings announcement, let’s delve into the factors that could influence Snap’s performance.
One of Snap’s primary growth drivers has been the increasing usage of Snapchat. The app’s rising popularity, especially among the Gen Z demographic (ages 13-24), is expected to boost Daily Active Users (DAUs). This growth in user base is likely to attract more advertisers, further strengthening Snap’s revenue stream.
Snap Inc. Price and EPS Surprise
For the upcoming quarter, the company anticipates Daily Active Users (DAUs) to reach 431 million. In the first quarter, Snapchat’s subscriber growth, as evidenced by DAUs, saw a notable increase of 10.2% year-over-year, bringing the total to 422 million. Over the year, Snap added an impressive 39 million DAUs.
Global DAU Projections
Our model estimate for second-quarter global DAUs is currently set at 431 million, indicating a growth of 8.4% from the same quarter last year. Breaking it down by region, the model estimates for DAUs are as follows:
- North America: 102 million
- Europe: 100 million
- Rest of the World (ROW): 229 million
Snapchat+ Subscription Service
In the first quarter, the Snapchat+ subscription service reached more than nine million paying subscribers. Features such as Creator Collab Campaigns and Snap Promote are expected to have significantly contributed to this growth in the reported quarter.
Diversifying Revenue Streams
The company has made substantial progress in diversifying its revenue streams through initiatives like Snapchat+, ARES, and sponsored AR advertising. These efforts are paving the way for continued growth and innovation.
The introduction of My AI, a ChatGPT-powered chatbot, directly integrated into Snapchat, highlights Snap’s commitment to incorporating cutting-edge AI technology into its core product. This strategic move, combined with efforts to enhance AR features and content creation tools using AI, underscores Snap’s recognition of AI’s potential to drive user engagement and retention.
ARPU Expectations for the Second Quarter
Our model estimates Snap’s second-quarter Average Revenue Per User (ARPU) at $2.88, which suggests a decrease of 7% from the year-ago quarter’s reported figure. This projection provides insight into the economic landscape Snap is navigating.
What Our Model Says
According to the Zacks model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) generally increases the odds of an earnings beat. Unfortunately, that’s not the case here.
Current Earnings ESP and Zacks Rank
Presently, Snapchat has an Earnings ESP of 0.00% and a Zacks Rank #3. While this may not be the ideal scenario for an earnings beat, it’s worth exploring other opportunities. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
In conclusion, Snap’s integration of advanced AI technology and focus on improving AR and content creation tools demonstrate a forward-thinking approach. Despite the projected dip in ARPU, the innovative steps being taken could pave the way for future growth and enhanced user engagement.
Are you looking to boost your portfolio this earnings season? Here are some top stocks to consider, which our model shows have the right combination of elements to potentially beat on earnings.
Promising Stocks to Watch
Arista Networks (ANET)
Arista Networks currently holds an Earnings ESP of +1.72% and boasts a Zacks Rank #1. Impressively, shares of Arista Networks have surged by 33.4% year to date. Mark your calendars as ANET is scheduled to report its second-quarter 2024 results on July 30. This could be a key date for investors to watch.
Apple (AAPL)
Apple has an Earnings ESP of +3.23% and is presently ranked #2 by Zacks. So far this year, Apple shares have appreciated by 13%. The tech giant is set to reveal its third-quarter fiscal 2024 results on August 1, making it another stock worth keeping an eye on.
Cognizant Technology Solutions (CTSH)
Cognizant Technology Solutions features an Earnings ESP of +0.09% and holds a Zacks Rank #2. Despite a 3.1% decline in its share price year to date, CTSH is scheduled to report its second-quarter 2024 results on July 31. This upcoming earnings report might provide an opportunity for a turnaround.
