Snapchat Q2 2018 earnings: Analysts predict disappointing report from Snap Inc.

Evan Spiegel, CEO of Snap Inc.
Hollis Johnson

• Snapchat’s parent company Snap Inc. reports its Q2 2018
  financial results on Tuesday.
• Many analysts are predicting a disappointing quarter,
  with flatlining user growth.
• The once-buzzy startup has made a number of significant
  missteps since going public in March 2017, and public consensus
  on it has soured.

It’s been a bumpy year and a half for Snap Inc.

In March 2017, the parent company of Snapchat went public, buoyed
by a wave of hype — but since then it has been plagued by
difficulties, from Instagram aggressively moving in on its turf
and issues with growth to a disastrous redesign, and its current
stock price ($13) is less than half of what it was after the IPO
($27).

On Tuesday, the California company announces its Q2 earnings —
and it’s fair to say that most Wall Street analysts aren’t
exactly waiting with bated breath.

Wells Fargo expects a drop-off in daily active users (DAUs), and
set a price target for the stock of $12: “While we see some cause
for improving sentiment—namely that usage trends have stabilized
after SNAP undid much of its app redesign and that ad pricing may
have bottomed out, with advertisers noting increasingly
attractive pricing in recent trade press coverage—we are lowering
estimates for SNAP as we take a more conservative view on daily
active users (we now forecast a modest sequential decline),
revisit [management] monetization commentary and incorporate
recent advertiser checks into our 2Q view.”

Analysts at Wedbush and RBC Capital Markets, meanwhile, follow
the street consensus and expect to see user numbers flatline.

Needham’s analysts slashed their expectations for Snap’s quarter,
but raised their estimates — because of the company’s “aggressive
cost cutting.”

A particularly brusing note from Rich Greenfield at BTIG listed
Snap’s repeated missteps — from Spectacles to traffic drop-off on
Discover — adding: “With a market cap still above $17 billion,
Snapchat’s valuation appears absurd relative to our revised
forecasts … So why not go to SELL?  While we
are tempted, sentiment on the stock is horrible and small
‘successes’ could lead to an overreaction of the stock (as we saw
in Q4). But more importantly, we are still intrigued by the
stickiness of the app as a communications platform.  While
our patience is wearing thin and we hate being wrong, there is a
massive shift of consumer time spent to mobile with few ways to
participate outside of the dominance of Facebook and
Google.  We are also intrigued that a 20-year Amazon
veteran, Tim Stone, decided to join Snapchat as its CFO in May.

Analysts at Barclays are more optimistic, predicting an “upbeat”
second half of the year following the hire of a new CFO, and
setting a price target for the stock of $16.

Get the latest Snap stock price here.