Snap Earnings: Will weak Snapchat results push share prices lower?

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Snap Q1FY2023 Results

Snap share prices tumbled about 18% on April 28th 2023 after the social media firm reported weak earnings for the quarter ended March 2023 and also highlighted the fact that it could miss revenue and earnings expectations for the upcoming quarters.

For a detailed view on Snap shares and its key business attributes, click here.

The major problem with Snap’s quarterly earnings performance is the consistent drop in ad revenues. Now as the global macro economic situation seems to be quite dire due to looming recession worries, a lot of companies have pulled back on advertisement spends as it is capital intensive. 

Instead, companies are spending on advertising only on top media platforms like Google, Facebook and Instagram, meaning smaller players like Snap are losing out on ad revenues. 

Snap Results: Key Highlights

  • Weak digital ad spends lead Snap to report poor quarterly results.
  • Snap missed analysts' revenue expectation as demand for ads dropped.
  • Snap warned investors that next quarter results will fail to meet expectations.
  • At Least 12 brokerages cut their price target for Snap stock after weak results.
  • Snap did not release any dividend during the quarter.

Snap Results: Historical Share Price Performance

Snap Inc shares returns-22.5%-70.5%-19.3%

(Data as on April 28th 2023)

Snap Q1 Results: Revenue Dropped

Snapchat's parent company, Snap Inc reported a 7% drop in its quarterly profit primarily amid a drop in ad spending by majority corporates. For social media platforms like Snapchat, Instagram and Facebook, advertisement income is one of the major sources of revenue. 

Snapchat also missed analysts' expectations for revenue and warned results in the next quarter could fall below Wall Street's targets, all because of weakness in advertising revenues. 

 Q1FY23Q1FY22% change
Total Revenue$989 million$1.1 billion-7%

Snap Q1 Results: Net Loss eased

Even as revenues dropped during the quarter compared to the previous year, the total net loss of the firm calmed a little. The company record a loss of $328 million, lower than the loss of $359 million made in the corresponding quarter last year. 

Why? A quick analysis of the company's quarterly income statement showed that the firm earned $38 million in interest incomes during the quarter compared to a mere $3 million in interest incomes during the corresponding quarter last year.

 Q1FY23Q1FY22% change
Net Loss           -$328 million-$359 million+3%

Snap Q1 Results: Daily Active Users jumped

 Q1FY23Q1FY22% change
DAU               383 million332 million+15%

Snap Q1 Results: Analyst View

  • Brokerage Goldman Sachs has a sell rating on the firm with a share price target of $7 per share
  • Renowned broker Deutsche Bank has a sell rating with a $8 share price target. 
  • Morgan Stanley has a sell call with a $6.5 per share price target.
  • Truist Securities has a sell rating on the stock with a price target of $7 per share. 

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.