Snap Inc.’s highly anticipated first earnings release date is coming up on May 10th, and will provide key information to concerned investors, the first since Snap’s IPO on March 2.
In order to help investors analyze what Snap’s impending first earnings report says about its financial future, we compiled the data from Facebook and Twitter’s earning releases in the years following their IPO’s for comparison and to give relevant context to the numbers that could shed light on Snap’s financial future.
To better understand how Snap’s numbers compare to Facebook and Twitter’s, we found the earnings for each company for the quarter immediately preceding the IPO and the quarter immediately following.
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Facebook, starting at nearly $9 million in revenue, saw a 32% increase in revenue ($1.184 billion) after the first quarter, but did not profit. Twitter reported nearly $250 million in revenue for its first quarter and saw a 54% increase in revenue, but also didn’t profit. Facebook and Twitter saw a 27% and 17% increase in daily active users, respectively, but both experienced decreased common stock price one-quarter after IPO.
Interestingly, Facebook’s stock stood at $29.34 while Twitter’s closed at over double that price at $66.32, even though Facebook’s revenue and net income were greater. Based on these trends, we might expect that Snap may experience an increase in revenue and active users, but will not return a profit.
While Facebook and Twitter followed similar trends right after their IPOs, the paths of the companies have diverged significantly. Common stock price for Facebook has soared, increasing nearly every quarter. Each quarter, Facebook has seen positive daily active user growth and positive revenue change (aside from the general quarter 1 slump). Twitter, on the other hand, has been experiencing negative revenue change, stagnating daily user growth, and declining stock price change.
While Snap had a wildly successful IPO, with shares soaring 50% in the first day of trading, recent events have made the company’s future look less promising. Snap’s first ever quarterly earnings report will provide critical financial and user growth data that will either justify investors’ doubts or restore faith in the company.
We found Facebook’s and Twitter’s revenue and daily active user count each quarter from each quarterly earnings release. For Twitter, daily active user count was determined by taking 44% of reported monthly active users on each quarter earnings release. Revenue change and user change represent percent changes from a previous quarter. The first quarter’s revenue and user change figures (Facebook – Q2 2014, Twitter – Q4 2013) represent percent changes from one year before.
Stock prices for Facebook and Twitter were taken at one day before the earnings release at close. Changes in stock price represent the percent change of the recorded stock price from one quarterly earnings release to another.
We compared revenue change and user growth with stock price change and found that stock price change followed similar changes as revenue change. However, stock price change trends did not follow user growth changes. This pattern can be largely attributed to the fact that more users does not necessarily mean more revenue. In fact, revenue generating products, or advertising options, would seem more closely related to stock price changes.
The introduction of Instagram Stories last summer posed a huge threat to Snapchat, causing its user growth figures to plummet by 82% in Q4 2016. In the months since, Instagram Stories has grown rapidly, adding more of features that mimic Snapchat’s and hitting 200 million daily active users for Stories alone.
Snap’s user growth numbers, which will be reported with their earnings on May 10th, will be a good indicator of whether its disappointing Q4 user growth was a fluke or a sign of an overarching trend of users migrating to Instagram Stories.
It’s worth noting that Twitter also had an extremely successful IPO, but its stock later plummeted, due in large part to stalled user growth. For this reason, the user statistics will be some of the most critical pieces of information Snap releases next week.