Should You Buy, Sell or Hold Snap Stock Ahead of Q3 Earnings?

Core Viewpoint - Snap is expected to report third-quarter 2024 results on October 29, with projected revenues between $1.335 billion and $1.375 billion, indicating year-over-year growth of 12-16% [1] - The company anticipates adjusted EBITDA between $70 million and $100 million for the quarter [1] Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is currently $1.35 billion, reflecting a 13.9% increase from the previous year's quarter [1] - The consensus estimate for earnings remains unchanged at 5 cents per share over the past 30 days [1] Earnings Performance History - Snap has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 81.07% [2] Factors Influencing Results - Increased usage of Snapchat, particularly among the Gen Z demographic, is expected to drive Daily Active Users (DAUs) to 441 million, representing an 8.7% year-over-year growth [4] - The company has introduced new features and products, including the fifth generation of Spectacles and AI-driven tools, which are anticipated to enhance user engagement [4][5] Subscriber Growth and Revenue Diversification - Snapchat+ has surpassed 11 million paying subscribers, with features like Creator Collab Campaigns contributing to this growth [5] - The estimated Average Revenue Per User (ARPU) for the third quarter is projected at $3.05, a 4% increase from the previous year [5] Competitive Landscape and Challenges - Snap's stock has declined 39.8% year-to-date, underperforming the Zacks Computer and Technology sector [7] - The company faces challenges from weak advertising spending and competition from major players like Meta and Alphabet [7][10] Valuation Metrics - Snap's forward 12-month price-to-sales ratio is 2.81, higher than the industry average of 2.67, indicating high growth expectations but also elevated risk [8][9] Strategic Positioning - Snap maintains a strong presence among the youth demographic, with 75% penetration among 13-34-year-olds in developed markets [10] - Recent investments in AR commerce and premium subscriptions aim to diversify revenue streams, although monetization efficiency remains a concern [10] Investment Considerations - The company's recent AI innovations and cost optimization efforts show potential for margin improvement, but advertising revenue growth is still vulnerable to macroeconomic conditions [10][11] - Investors may consider waiting for clearer signs of sustained advertiser demand and monetization improvements before making investment decisions [11]