Snap Is Not Falling Because of a "Revenue Miss" | This is the Real Reason

TL;DR

Snapchat's earnings report shows a revenue miss and a significant decrease in average revenue per user, leading to a 25% drop in the stock price.

Transcript

hey everyone well for the third time this year Snapchat came out with earnings last night and it has spooked pretty much the entire Market most uh commentators are saying that this is because there was a revenue Miss but as you'll see I don't think that explains why the stock is down over 25 percent right now in fact I think that there's much bigge... Read More

Key Insights

• 👤 Snapchat's revenue miss and decline in average revenue per user indicate challenges in monetizing its user base effectively.
• 👤 The competition from Instagram's Stories feature poses a significant threat to Snapchat's engagement and user base.
• 💱 Platform policy changes, such as Apple's ATT update, have negatively impacted Snapchat's ability to generate revenue.
• 🤨 The increase in operating expenses, particularly stock-based compensation, raises concerns about the company's financial management and execution.
• 🫓 The company's future revenue growth is projected to be flat, highlighting potential challenges in sustaining growth.
• 👤 Investor focus should be on average revenue per user, daily active user growth, free cash flow, and the company's ability to meet guidance.
• 📪 Snapchat's moat appears to be narrowing, and there are red flags for shareholders regarding engagement and advertiser attrition.

Questions & Answers

Q: Why did Snapchat's stock price drop by over 25% after the earnings report?

The drop in stock price can be attributed to a revenue miss, as well as a significant decrease in average revenue per user, indicating challenges in monetization.

Q: What were the positive aspects of Snapchat's earnings report?

The report highlighted a 19% increase in daily active users globally and positive growth in time spent watching content on Discover and Spotlight.

Q: What factors contributed to the decrease in average revenue per user?

Snapchat attributed the decrease to platform policy changes (such as Apple's ATT update), macroeconomic headwinds, and increased competition from rivals like Instagram.

Q: How did operating expenses impact Snapchat's financial performance?

Operating expenses increased by 32%, outpacing revenue growth, and resulted in higher stock-based compensation, which raises concerns about the company's execution and shareholder value.

Summary & Key Takeaways

• Snapchat's revenue for the third quarter missed expectations by $2 million, leading to a decline in stock price.

• Daily active users globally increased by 19%, but the company struggled to monetize them effectively.

• Average revenue per user dropped by 11%, attributed to platform policy changes, macroeconomic headwinds, and increased competition.