After the market on October 20, Eastern Time, Snapchat announced its financial report for the third quarter of fiscal year 2020. After the financial report was released, Snap's post-market share price rose by 24%, and the stock price increase showed the capital market's attitude towards Snap's latest financial report. As of the publication of the US Stock Research Agency, snap reported 28.45 US dollars per share, with a total market value of approximately 41.7 billion US dollars.
In this quarter, Snap achieved a more eye-catching performance in terms of revenue growth and net loss improvement. However, behind this dazzling financial report data, snap also has problems such as stable user growth and weak growth, especially in the context of the rapid growth of Tiktok users. Specific to this financial report, how should investors view it?
Core business picks up, revenue growth picks up, user growth performance is still the key point
Financial report data shows that Snap's quarterly revenue this quarter was 678 million US dollars, compared with 446 million US dollars in the same period last year, an increase of 52% year-on-year. Judging from the quarter-on-quarter data, revenue in the second quarter was US$454 million, an increase of 49% from the previous quarter.
In the last fiscal quarter's earnings report, Snap executives did not give official expectations for the quarter's revenue data, and perhaps they were worried that the growth rate of this quarter's revenue data might slow down. But judging from the revenue data for this quarter, this concern of management does not seem to come true.
From the revenue data chart for the past six quarters, it can be seen that, except for the macro impact of advertisers cutting advertising budgets in the second quarter of this year, which slowed down the growth rate, Snap maintained a relatively good revenue growth rate in the remaining quarters.
This quarter's revenue growth rate exceeded 50%. The most intuitive reason may be the gradual recovery of the online advertising market in North America. In the third quarter, with the gradual increase in the number of companies resuming work and production in North America, the number of advertisers for snaps increased. In the market environment where offline office has not yet been realized on a large scale, advertisers have also moved more offline investment to online, which directly pushed up snap's revenue this quarter.
The core element of social media advertising is user retention time. Financial report data shows: In the third quarter, the total daily time spent by Snapchatters watching programs increased by more than 50% year-on-year; in addition, the average daily number of Discover content on Snap in the Indian market The chain increased by nearly 50%. The increase in client retention time also provided support for the growth in revenue this quarter.
In terms of user data that is the most critical to revenue growth, this quarter achieved an 18% increase. Although the number of daily active users still maintains an incremental growth, the growth rate of the number of users in the past four quarters has stabilized. The US Stock Research Agency predicts that snap will compete with other social media track competitors in the future to become more intense.
From a competitive perspective, the Russian satellite news agency sputniknews reported that the number of people who regularly visit social media Facebook has grown at an annual growth rate of 8%, reaching 2.5 billion as of January 2020, accounting for about one-third of the global population.
Pinterest surpassed Snapchat in 2019 to become the third largest social media platform in the United States. According to statistics from eMarketer, the total number of users of Pinterest in the United States in 2020 will reach 86 million, and the user growth rate is expected to be 4.4%, which is higher than the total number of users of snap 2020 of 83.1 million and the growth rate of 3.6%.
In addition, the number of TikTok US users will reach 45.4 million in 2020, a year-on-year increase of 21.9%. In 2021, the number of users will exceed 50 million.
For snap, it faces a double attack on the social media track. There are old social giants represented by Facebook, and new social media platforms represented by Pinterest and TikTok. How to retain existing user groups in the future and open up incremental users Quantity will be a very urgent issue.
Net loss has narrowed year-on-year and month-on-month, but there are still concerns about higher costs
According to the financial report data for this quarter, Snap's net loss was US$199 million, which was a 12% year-on-year decrease compared with the US$227 million in the same period last year. Compared with the loss of US$326 million in the previous quarter, the quarter-on-quarter decrease was 39%. .
This quarter's loss situation has improved both year-on-year and quarter-on-quarter. For Snap, which has not yet turned a profit, it may also be an important reason for its post-market rise. But combined with the loss situation in recent quarters, Snap's loss situation does not seem to see signs of improvement. To make matters worse, according to market consensus, the company will not be profitable until at least 2021, or may never be profitable.
Specifically, behind Snap's continuous losses are continuous product innovations in response to the increasingly fierce market environment. Among the 50 most innovative companies in the world published by Fast Company, one of America's most influential business magazines, Snapchat parent company Snap topped the list.
The most important support behind innovation is capital, and the impact it brings is the rise in operating costs. From the perspective of various operating expenditures in the quarter: research and development expenditures were US$283 million, a year-on-year increase of 34%; sales and marketing expenditures were US$143 million, a year-on-year increase of 16.3%.
Snap took a "hitch ride" on the Internet social media track. With the help of the "good opportunity" of global health incidents, it has also made good progress this year, but if it fails to make profits for a long time, the patience of the capital market may sooner or later disappear Exhausted.
From the perspective of competition, it is not compared with giants such as Facebook and Google, but only with Pinterest, which is comparable in size. Pinterest's loss situation is much better than Snap. The US Stock Research Agency believes that this is related to Snap's large-scale expansion of its business. It wants to compete with Facebook, Twitter, Google and other online advertising market shares, but its profitability cannot keep up. Pinterest's business is smaller and more precise.
The rebound of digital advertising boosts industry stock prices. What are the opportunities for snap to expand the e-commerce track?
With an after-hours increase of 24%, investors are obviously more satisfied with snap's earnings report. Year-to-date, Snap’s stock price has risen by 74%, while Nasdaq’s price has risen by 28% over the same period. The stock price increase far exceeding the broader market indicates that Snap’s good performance this year.
In terms of stock price ratings, 24 analysts rated snap stocks as "buy", 11 recommended "hold" and only 1 recommended "sell". Based on the opinions of multiple analysts, its overall rating is "Recommended Buy".
Snap is the first social media track company to fire in the third quarter, and its performance reports and stock price performance will also affect other companies on the track. After the U.S. stock market on October 20, affected by the increase in snap stock prices, Twitter rose 5.39%, Facebook rose 2.87%, and Pinterest rose 5.78%.
Snap's good performance indicates to some extent that the US online advertising market has bottomed out and rebounded, and this rebound is also good news for social media companies such as Facebook and Twitter that rely on advertising. In this context, the US Stock Research Agency predicts that the stock prices of social media companies will be high in the third quarter of this year.
For Snap, its source of revenue mainly relies on user traffic in exchange for funds from advertisers. Snap has also been trying to expand its revenue sources. The biggest move is the development of e-commerce.
Since snap's user base is mainly retained in North America, in developing e-commerce business, snap's strategy is to cooperate with Amazon. As early as 2018, the Snap Android version included a new feature called "Visual Search", which can use Snapchat's camera to send product pictures or barcodes to Amazon, and then Amazon will present the search results.
However, the final result seems to be poor. Perhaps the main purpose of users browsing Snap is leisure and entertainment. Therefore, it is quite difficult for brand owners to establish the concept of shopping on Snapchat. The transformation and cultivation of concepts and habits are not easy.
In addition, the types of products consumed are vertical, the main core user group of Snap is between 13-34 years old, and the positioning attributes of the entertainment social platform make the product categories limited.
However, this does not mean that snap has no chance to do e-commerce business. At present, online consumption shows the characteristics of scene and fragmentation. The consumption pattern of making long shopping lists to purchase still exists, but the frequency of online shopping consumption has declined. Although the emergence of Amazon and eBay has brought about certain changes in the field of shopping consumption, to a large extent they only transfer offline consumption scenes to online.
With the increase in the frequency of users switching scenes between platforms, consumption scenes are increasingly becoming fragmented. Coupled with snap's precise advertising push technology, there is undoubtedly an advantage in reaching user consumption scenes. How to make good use of this trend and existing advantages will test the wisdom of snap management.
Source of this article: US Stock Research Institute, please indicate the copyright