Snap (NYSE: SNAP) shares plummeted more than 28% on Friday after the company’s reported its Q3 results, delivering its slowest revenue growth since going public. Q3 EPS was $0.08, beating the Street estimate of ($0.24).
Revenue increased 6% year-over-year to $1.13 billion, slightly better than the Street estimate of $1.12 billion. Daily Active Users (DAUs) were 363 million, representing 19% year-over-year growth. The company gave no guidance for Q4 revenue or adjusted EBITDA given uncertainties related to the operating environment.
While DAUs surprised to the upside, all of the beat was driven by ROW net additions which monetize at a fraction of US/European users, and are unlikely to be a meaningful revenue driver in the near term.
Analysts at Deutsche Bank provided their views on the report, lowering their price target to $9 from $14. With limited visibility around a potential rebound in advertising growth given (1) the softening macro backdrop, (2) growing competition for experimental budgets, (3) engagement shifts away from high-monetizing Stories, (4) user growth that is increasingly skewed towards lower-monetizing regions, and (5) time spent on content in the US declining, the analysts struggle to identify a clear and sustainable inflection point to the upside.