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Snap is Snapchat’s corporate parent.
Dreamstime
Get ready for an update on the profitability of social media companies.
Snap
,
the corporate parent of
Snap
chat, will kick off earnings season for the industry with its report for its fiscal first quarter after the market closes on Thursday. The numbers could offer indications of what to expect from reports later this month from digital advertising-focused firms like
Meta Platforms
.
The last time Snap (ticker: SNAP) reported results ahead of Meta (FB) and Twitter (TWTR) was in October. Those numbers showed that Wall Street had underestimated the financial hit the firm took from changes to
Apple
’s
operating system for mobile devices that required apps to ask users for permission to track what other sites they visited.
The shift, intended to enhance privacy, made it harder for social media firms like Snap to track whether advertisements prompt a desired action by consumers. Snap served as a bellwether, sending shares of Meta falling, too.
On the flip side, Meta’s disappointing fourth-quarter results in February prompted a slide for Snap, but the stock bounced back when its own results were better than feared. Investors may want to keep that in mind if social media stocks react—up or down—to Snap’s report
Rosenblatt Securities analyst Barton Crockett, who launched coverage of Snap stock with a Buy rating and a $49 price target earlier this week, wrote in a note to clients that Snap has made progress adjusting to Apple’s changes. The stock closed at $30.76 on Wednesday.
“Snap was very active in migrating advertisers to its own tools to mitigate the loss of targeting capabilities from Apple’s new privacy stance,” Crockett wrote. “Snap said that 75% of its direct response advertisers were now using its tools. Much of that was recently accomplished, and it takes a few weeks of testing before advertisers gain comfort. So the transition is likely to be more helpful over time.”
For the first quarter, analysts expect Snap to report a net loss of 17 cents a share and sales of $1.07 billion, according to FactSet. Wall Street analysts expect the company to report 331 million daily active users during the quarter.
BofA Global Research analyst Justin Post noted that the stock has been under pressure from the war in Ukraine, competition from TikTok, and concerns about consumer spending if the U.S. enters a recession. He’s still bullish on the stock, pointing to opportunities for the firm to post stable growth in the second half of 2022.
This article will be updated with Snap’s quarterly results.
Write to Connor Smith at connor.smith@barrons.com
