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Snap Q1 daily active users likely jumped another 20% as pandemic boost extended

Emily McCormick
·Reporter
·3 min read
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Snap (SNAP) will report fiscal first-quarter results after market close, with the results expected to show still-strong revenue and user growth amid ad product improvements and heightened engagement during the pandemic.

Here were the main metrics expected from Snap's report, compared to consensus estimates as compiled by Bloomberg:

  • Q1 Revenue: $743.97 million expected vs. $462.48 million Y/Y 

  • Q1 Adjusted loss per share: 6 cents vs. 8 cents Y/Y 

  • Daily active users: 275.4 million expected vs. 229 million Y/Y 

Like many other social media platforms, Snap, the parent company of the disappearing image-sharing app Snapchat, benefited from a rise in adoption and engagement during the pandemic as users stuck at home sought out entertainment online. Daily active users increased between 17% and 22% year-over-year in every quarter in 2020, for growth rates well above those from 2019. Snap is expected to have grown its user base by another 20% in the first three months of 2021.

And Snap has remained popular among one of its most lucrative cohorts — teen users. Snap remained the most popular social media platform among U.S. teens between mid-February and March this year, outpacing even TikTok and Facebook-owned (FB) Instagram, Wall Street firm Piper Sandler said in its semi-annual "Taking Stock with Teens" survey.

At the same time, however, investors will be especially attuned to any signals from Snap's report that the momentum might be slowing down heading into the second quarter and second half of this year, once more social distancing restrictions get rolled back and users begin to go out more frequently. Netflix's (NFLX) first-quarter results from earlier this week served as one example of a media company already experiencing payback after a 2020 boost, with net subscriber additions sharply missing expectations. 

"The month of April should be peak growth for the Online media sector, and the key question for the group is if positive estimate revisions outweigh any potential sector multiple compression," Justin Post, Bank of America research analyst, wrote in a note published April 19.

However, he added, "We continue to be constructive on Snap's innovative products, management execution and ad checks that suggest platform adoption, and think it is positive for Snap to be reporting first in sector, before peers highlight tougher 2nd half comps." 

UKRAINE - 2021/01/15: In this photo illustration, Snapchat logo is seen on a mobile phone screen, silhouette of a hand holding a phone with the Snapchat logo in the background. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
UKRAINE - 2021/01/15: In this photo illustration, Snapchat logo is seen on a mobile phone screen, silhouette of a hand holding a phone with the Snapchat logo in the background. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

Still, Snap also has a "reopening trade" angle to its business, given that its advertising sales are expected to pick back up in tandem with economic growth, as customers become more apt to spend on marketing. 

According to Cowen analyst John Blackledge, one of the key drivers of Snap's first-quarter results will be its ramping direct response advertising, which is centered on engagement and has helped drive higher pricing for Snap's ad business. Blackledge rates the stock as Outperform with a price target of $88.00, implying additional upside of about 50%.

"Per our most recent ad buyer survey, Snap is benefiting from increased auction pricing and strong interest in its direct response offering," Blackledge wrote in a note released on April 15. "We expect daily active users to grow 7% annually '21-'26, coupled with rising advertising monetization of the platform, to drive revenue growth and higher incremental margins over time."

Shares of Snap have risen 16.4% for the year-to-date through Wednesday's close, outperforming against the S&P 500's 11.1% gain over the same period. 

This post will be updated with the results of Snap's Q1 earnings results after market close on Thursday. Check back for updates.

—

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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