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Stock Analyst Update

Snap Slightly Misses Q1 Expectations; FVE Down to $63

Snap reported first-quarter results slightly below our projections due partially to the Ukraine war and various macro headwinds. We have reduced our fair value estimate for Snap to $63 from $66.

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Snap (SNAP) reported first-quarter results slightly below our projections due partially to the Ukraine war and various macro headwinds. While Snap's daily average user count grew impressively, growth in user monetization was moderate. Management indicated that top line growth was above expectations (about 44%) prior to Russia invading Ukraine but that some advertisers paused or reduced spending in the days after. Snap's strong start to the quarter supports our view that the firm remains a major participant in the social network market and will improve its user monetization as it attracts more advertisers under better geopolitical conditions.

With the possibility of a slowdown in revenue growth during the last two months of the second quarter and impact of further macro and geopolitical headwinds, management guided further deceleration in revenue growth during the second quarter. While we have lowered our estimates, we continue to expect improvement in Snap's revenue growth in the second half of this year given the platform's continuing strong user growth. We have reduced our fair value estimate for Snap to $63 from $66.

Snap reported total revenue of $1.06 billion, up 38% driven by growth in daily active users (18%) and average revenue generated per user (17%). User growth remained stable in the U.S. (5%) and Europe (10%) while the firm continued to display impressive returns on investments in expanding usage of the platform geographically, increasing outside the U.S. and Europe 35%. User monetization remained strong in all regions, mainly driven by higher prices, possibly indicating advertisers' increasing adoption of Snap's platform.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.