What analysts are saying about Snap's disappointing second quarter (SNAP)

Evan Spiegel

Snap Inc. failed to meet Wall Street's expectations for its second quarter as a public company on Thursday, sending its already-battered stock diving to an all-time low.

The number of daily Snapchat users increased by 7 million from the first quarter, but analysts were expecting that number to go up by 10 million. Snap also fell short of the Street's revenue expectations by reporting $181.7 million with a net loss of $0.16 per share.

Snap stock has fallen off a cliff since its hotly anticipated initial public offering earlier this year. Investors are worried that the young app maker won't be able to grow its ad business in the face of mounting competition from Facebook.

Also weighing on the stock: Employees will also be able to sell their shares on the public market for the first time next week, presenting an ultimate test of confidence in the company.

Here are the key numbers from Snap's Q2 earnings:

Revenue: $181.7 million vs. $189 million expected.
Earnings per share (adjusted): Net loss of $0.16 vs. $0.15 expected
Daily active users: 173 million vs. 175 million expected.

Here's what Wall Street analysts are saying about Snap's disappointing Q2 results:

Jefferies: BULLISH

Rating: Buy

Price target: $16

Comment: "Near-term issues hang on the stock, but we believe patient investors should look through the noise at the long term opportunity. We are lowering our numbers in the near-term on weaker pricing. Maintain Buy and PT to $16.

2nd quarter in a row with miss quarter (on no guide). Pricing in the near-term ill be weak as they use pricing as a lever to continue to on board additional advertisers to build out robust demand for Snap Ads. Additionally, Snap will face pressure from employees being able to sell shares for the first time since IPO (although co-founders Spiegel & Murphy noted they would not sell their ~422MM shares this year). Lastly, we feel that SNAP's unwillingness to provide Street guidance will continue to be a disservice to shareholders as estimates continue to fluctuate wildly and it introduces unneeded uncertainty into results (even an overly conservative guidance would be appreciated)."

Goldman Sachs: BULLISH

Rating: Buy

Price target: $23

Comment: "Snap reported 2Q revenue of $182mn (+153% yoy vs. 286% in 1Q) and adj. EBITDA of ($194)mn vs. our forecasts of $188mn and ($174.8)mn. DAU net adds were 7mn, down from 8mn in 1Q and below our estimate of 10mn, though North America net adds were +4mn, up from +3mn in 1Q. While SNAP remains a near venture stage investment with all of the risks that implies, we continue to believe its audience and engagement represent a unique asset that will benefit from the growth and diversification of internet usage and advertiser adoption as both mature. Therefore, we remain Buy-rated with a 12-month price target of $23, down from $27."

RBC Capital: BULLISH

Rating: Outperform

Price target: $20

Comment: "Q2 Revenue, EBITDA, and DAUs fell short of Street expectations - Revenue by 3%, EBITDA by 7%, and Net DAU’s by 2MM. While results are weaker than expectations, we still argue against results altering our long-term thesis. Way too early with much of the market still up for grabs. Materially lowering estimates & PT to $20. Maintain Outperform."

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