![]() While ARPU did decline in the latest quarter, the long term thesis remains the potential for SNAP to catch up to the ARPU seen at larger peers. SNAP has expanded its ad format offerings - important considering that it was only servers years ago that investors questioned if advertisements were possible in the first place. SNAP has also unveiled a premium subscription offering with over 1.5 million subscribers. SNAP has made great strides in augmented reality, and many users now use the app to assist in AR shopping. This isn't just a silly video company anymore (at least that's how I thought about it before). SNAP remains a niche social networking company reaching over 70% of 13 to 34 year-olds. In this pessimistic environment, it is worth reminding ourselves of the original thesis. And many of the really significant macro impacts that we've seen over the course of this year weren't impacting the business nearly as much as they were a year ago. So, the issue that we're seeing here is that if you look back to a year ago, we grew at over 40% year-over-year in the prior year. So, we are expecting revenue to grow seasonally at a pretty good clip. Management did not provide guidance for the fourth quarter but on the conference call noted that growth was around 9% thus far and expected to end up flat.Įven flattish year-over-year revenue growth is about a 15% step-up on a quarter-over-quarter basis. SNAP ended the quarter with $4.4 billion of cash versus $3.7 billion of debt. That was enough to make a dent in shares outstanding even inclusive of ongoing share-based compensation. The company did complete its $500 million share repurchase program and announced a new $500 million program. SNAP is still not profitable on a GAAP basis and saw adjusted EBITDA margins contract sharply. Rest of World led those declines with a 9% decline - perhaps that explains why revenue growth was strong there. In spite of having a low ARPU, SNAP saw ARPU decline 11% YOY. Strength in DAUs growth is a core reason why I remain bullish.Ī growth slowdown is one thing, but the decline in average revenue per user ('ARPU') may have been the last straw for many. Snapchat continues to resonate with its demographic base. The strong 22% growth in "rest of world" was not nearly enough to offset the growth slowdown in North America and Europe.Ī lone (but important) bright spot was the 19% growth in daily active users ('DAUs'). SNAP has previously guided towards minimal growth and that proved to be the case, with revenues growing by only 6%. Even at these lower valuations, investors should continue to expect high volatility. I last covered SNAP in June and the stock has crashed around 30% since then. The stock has nosedived over the past year. It wasn't too long ago that SNAP had become a sizable social media company. With plenty of cash on the balance sheet to buy valuable time, the stock is highly buyable here. Even with growth coming to a standstill and GAAP profitability still nowhere in sight, the stock is trading at distressed valuations. ![]() The fundamentals are showing that advertisers have proven quick to reduce spending on SNAP's platform amidst a weakening economy. After the post-earnings plunge, we are getting that opportunity yet again. In 2021, I remember thinking to myself: why didn't I buy SNAP in 2019 when pessimism was at its peak? The stock would have returned over 10x over that time period. ![]() ![]() Steve Jennings/Getty Images Entertainment
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