Snap Expected to Post Narrower Loss, Decline in Revenue

Snap Inc. (SNAP) is expected to post lower revenue and a narrowed net loss for the first quarter this week, driven in part by declines in its life blood, digital advertising spending.

The social media-app company is expected to post its fifth consecutive quarter of loss per share, at 22 cents, similar to the year-ago quarter. Net loss at the company is seen narrowing to $348 million from a net loss of about $360 million a year ago, according to Visible Alpha data. The company also is expected to post a decline in revenue for 2023's first quarter to $1.01 billion, down about 4.7% from $1.06 billion in the same period last year. Snap will release its latest earnings report on Thursday.

Snap is suffering from the slowing advertising revenue trend that's affected most big tech firms. The Wall Street Journal reported April 12 that digital ad revenue in the U.S. rose by more than 10% to $209.7 billion last year. However, that was well below the 35% jump in 2021, as marketers reacted to slower economic growth in 2022. For Snap, that pullback is expected to produce a fall in ad revenue to $998 million from $1.06 billion in the prior-year period and almost $1.3 billion in the fourth quarter of last year.

Social media advertising revenue overall grew by 3.6% in 2022, marking a sharp drop from a 39% advance a year earlier, according to an Interactive Advertising Bureau (IAB) report. In addition to economic factors, Facebook (META) has cited changes to privacy measures taken at Apple Inc.(AAPL) as a barrier to advertisers accurately measuring and efficiently targeting their digital campaigns.

“Social media, of all the different kinds of [media] types that we looked at, was the most adversely affected in 2022” as the result of tech platform policies, David Cohen, IAB's CEO, told The Wall Street Journal in April.

Snap Inc. stock has rallied about 16% so far in 2023, but that is underperforming the S&P 500 Communication Services sector, which is up about 20% year-to-date.Over the past 12-months, the Snap stock has lost 65% in value, while the index only declined about 8%.

The Key Metric

Investors will be watching the daily active users (DAUs) reported at Snap. That figure has continued to rise for Snap despite the economic headwinds the company is facing, with a projected jump to 383 million users expected, up from 332 million in the year-ago first quarter. Analysts expect Snap to be a big gainer from a potential ban of its Chinese rival TikTok in the U.S.