Key Takeaways
- Snap shares fell 8% after third-quarter revenue and daily active users came in just below estimates.
- Snap turned a $56 million profit, but its advertising revenue grew just 4% as brand ad spending fell.
- Meta Platforms is growing far faster, while Pinterest guided to slower growth.
- Snap looks cheap, and it’s likely to stay that way until its ads grow faster.
Snap (SNAP) stock fell 8% today. Third-quarter revenue and users came in just short of Wall Street’s numbers, and CEO Evan Spiegel admitted that ad revenue growth “remains below our ambitions.”
Two weeks ago, Meta Platforms (META) grew 26%. Pinterest (PINS), which sells to many of the same brand advertisers as Snap, guided to slower growth last week.
A slight miss, and a big profit
Revenue rose 14% to $1.72 billion, a hair below the $1.73 billion analysts expected, per LSEG. Daily active users reached 495 million, short of the 499 million StreetAccount expected.
But costs grew just 1%, so about 93% of the added revenue became adjusted EBITDA. That more than doubled to $383 million, well ahead of the $337 million analysts expected. Snap earned $56 million, after losing $104 million a year earlier.
The fourth-quarter guide of $1.95 billion to $1.985 billion puts 2026 right around the $6.81 billion analysts expected going in. They already had growth slowing from here:
Ads grew just 4%
Advertising revenue grew just 4%, down from 9% in the second quarter, while other revenue, mostly subscriptions, jumped 84%. App-purchase campaigns grew over 54%, but brand advertising fell. Chief commercial officer Ronan Harris blamed consumer packaged goods companies cutting back over “macro pressures in the U.S. and also the Middle East.”
TIKR tracks 42 analysts on Snap. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Snap, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Snap’s Analyst Ratings
Where the ad money is going
AppLovin (APP) reported the same night, and its revenue rose 55% to $2.18 billion. Snap’s app-purchase ads go after the same mobile-app budgets. With both growing that fast, the pool looks big enough to feed Snap without starving AppLovin.
Meta’s price per ad rose 14%, and it guided fourth-quarter revenue to $73 billion to $76 billion. Brands that want reach are paying Meta more for it.
Pinterest guided fourth-quarter revenue to 8% to 12% growth, after 12% in the third quarter. Snap isn’t alone: brand budgets look tight for the smaller platforms.
Cheap, and likely to stay that way
Snap traded at 7.5x forward earnings at the last close, well under its one-year average of 12x, and today’s drop takes it lower still. But those earnings leave out about $1.05 billion of stock pay this year, so it’s less of a bargain than it looks.
I’d stay on the sidelines. The profits are real, but advertising is still most of Snap’s revenue, and it grew 4%. Until brand spending comes back, I don’t see much to lift the multiple.
Of course, the fourth quarter is Snap’s biggest ad season, and the report in early February will show whether it hit its guide.
So what is Snap stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Snap could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
