Snap reports its Q2 results on Tuesday, July 23. The company’s Q1 had beat consensus expectations on revenue and EPS thanks to a better-than-expected user growth. In Q2, we will be looking out for:
- Continued traction in the Android user base
- Management commentary around ARPU expansion
- Competitive environment in light of increased scrutiny around Facebook’s business model
Trefis estimates that Snap’s stock has a fair value of $10, which is roughly 30% below the current market price. We capture trends in Snap’s Earnings over recent quarters along with our forecast for the year in an interactive dashboard. You can modify any of the key drivers to visualize the impact of changes on Snap’s valuation. Additionally, you will find more Trefis information technology data here.
A Quick Look At Snap’s Sources Of Revenue
Snap makes money by selling advertising space on its platform. The company’s revenue ($1.2 billion in 2018) was reported across the following two segments:
- North America ($781 million in 2018 revenue, contributed 66% to total revenue): Segment revenue was derived from the sale of advertising solutions to customers in the North America region.
- International ($399 million in 2018 revenue, contributed 34% to total revenue): Segment revenue was derived from the sale of advertising solutions to customers in the European region and the rest of the world.
- North America revenues more than doubled to $0.78 billion in 2018 from $0.36 billion in 2016. The change of $0.42 billion over this period implied an annualized growth rate of 47%. Q1 2019 revenue came in at $0.23 billion (33% y-o-y), and we expect revenues for full-year 2019 to reach $1 billion (28% y-o-y) for the first time.
- International revenues have grown more rapidly than North America revenues – increasing to $400 million in 2018 from just $41 million in 2016 at an annualized rate in excess of 200%. We expect 2019 revenue to reach cross $550 million (39% y-o-y).
- Taken together, this represents an increase in total revenues for the year to $1.56 billion from $1.2 billion in 2018 (an 32% jump)
- Snap’s loss widened from $515 million in 2016 to $1.2 billion in 2018 as the company expanded internationally. An improvement in profit margins leads us to believe that losses for the year will fall to roughly $950 million.
We expect revenues to be $1.6 billion in 2019. Using a P/S multiple of 9x and share count of 1.3 billion, this works out to a fair value of $10 per share for SNAP’s stock, which is 35% below the current market price.
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