Loss, Revenue Surge Expected in Snap's First Post-IPO Report -- Earnings Preview

By Georgia Wells Features Dow Jones Newswires

Snap Inc., the parent company of Snapchat, is scheduled to report quarterly earnings, its first since going public in March, after the market closes on Wednesday. Here are the key points to watch:

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EARNINGS FORECAST: Analysts expect Snap's net loss to grow to about $2 billion, from $104.6 million a year ago, due to a one-time hit from IPO-related compensation expenses. Analysts expect Snap's operating loss, excluding items like taxes, depreciation and stock-based compensation, to grow to $181 million, from $93.2 million a year ago, on ballooning expenses such as research and development and sales and marketing.

REVENUE FORECAST: Snap is expected to record about $158 million in first-quarter revenue, according to FactSet, more than quadrupling from the $38.8 million in the same period last year, according to a public filing Snap revealed before its IPO. Still, it would be less than Snap's $165.7 million of fourth-quarter revenue.

WHAT TO WATCH:

-FENDING OFF Facebook: Snap's rival Facebook Inc. has attempted to copy many of its features, such as Snapchat's Stories -- collections of Snaps that play in chronological order. Facebook's clones are growing popular: in a survey of more than 3,000 Americans conducted in April by venture-capital firm Goodwater Capital, 25% of respondents said they prefer Stories on one of Facebook's platforms, such as Instagram, compared with 12% who prefer Snapchat's Stories. This cranks up the pressure on Snap to address the Facebook threat. Stories are important to Snap's business, because they are one of the sections of the app where Snap displays advertising to users. "Q1 and Snap's future hangs on these Stories," says Eric Kim, managing partner at Goodwater.

-REVENUE PER USER: Snap has indicated that it isn't interested in the global ubiquity that other social media giants chase, instead wanting to focus on users in more developed markets with the most advertising dollars. How quickly Snap can increase the money it makes per user will test its approach. Ronald Josey, senior internet analyst with JMP Securities, projects Snap made 81 cents per user in the first quarter. Facebook made $4.23 per user globally in the first quarter, and $17.07 per user in the U.S. and Canada. Snap's advertising business is still young -- it launched advertising on the app in October 2014. Meanwhile, Snapchat's user growth is expected to continue to slow: Kip Paulson, analyst at Cantor Fitzgerald, predicts Snapchat added 17.3 million net new daily users in the first quarter, bringing Snap's daily user base to about 175 million, representing growth of 43.7%, compared with an expansion of 46% in the fourth quarter last year.

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-AUGMENTED REALITY: While Snap has been at the forefront of introducing augmented reality features, it has revealed little about how they figure into Snap's larger plans for its business, such as monetization. Wells Fargo's Peter Stabler notes he would like to see Snap discuss how it can maintain its early leadership position in augmented reality applications. Facebook already outlined its own ambitions for augmented reality at the F8 developer conference in April.

Write to Georgia Wells at Georgia.Wells@wsj.com

(END) Dow Jones Newswires

May 10, 2017 05:44 ET (09:44 GMT)