Snap re­sults due amid skep­ti­cism from in­vestors

Los Angeles Times - - BUSINESS BEAT - By Paresh Dave paresh.dave@la­times.com / PGP Twit­ter: @peard33

Snap Inc. closed the sec­ond quar­ter with new hard­ware — pick­ing up three gold awards for its Spec­ta­cles sun­glasses at the glitzy Cannes ad­ver­tis­ing fes­ti­val on the French Riviera.

But on Thurs­day, when Snap re­leases its sec­ondquar­ter earn­ings re­port, it faces a more cru­cial panel of judges: an in­vest­ment com­mu­nity deeply skep­ti­cal about the com­pany’s prospects.

Snap’s shares have fallen more than 40% since its last earn­ings re­port, with some of the drop fu­eled by an in­crease in trad­able shares.

In the last month, 10 fi­nan­cial an­a­lysts have low­ered their long-term tar­get for Snap’s share price while just one an­a­lyst has in­creased it.

In­vestors will be judg­ing Thurs­day whether Snap’s re­cent fea­tures launches and its ef­forts to woo ad­ver­tis­ers, in­clud­ing a big Fer­ris wheel at Cannes, are push­ing its nascent ad­ver­tis­ing busi­ness in the right di­rec­tion.

Snap’s grow­ing sales force con­tin­ues to reach out to ad­ver­tis­ers to pitch the value of buy­ing com­mer­cials and other va­ri­eties of ads on Snapchat.

The dis­ap­pear­ing chat app had 166 mil­lion daily users as of March, and Snap main­tains that its fea­tures are at­tract­ing more users de­spite the ideas be­ing copied by com­peti­tors such as In­sta­gram.

An­a­lysts who study the com­pany say they’re see­ing pos­i­tive signs. Ron Josey of JMP Se­cu­ri­ties told clients this week that Snap sold fa­cial-fil­ter ads known as Spon­sored Lenses on 60% of the days his firm tracked in the sec­ond quar­ter. The pace picked up over the April-through-June pe­riod and con­tin­ued to in­crease in July, he said.

The com­pany also be­gan sell­ing Spec­ta­cles, the video-film­ing glasses, in Europe dur­ing the quar­ter. Ex­panded avail­abil­ity could pro­vide a small boost to Snap’s sales.

But Josey cau­tioned that “Snap’s ad prod­uct de­vel­op­ment has not pro­gressed as fast as we had ini­tially thought.” He low­ered his one-year tar­get on Snap shares to $25 from $28.

An­a­lysts also noted that pos­i­tive fi­nan­cial re­sults may not be enough to quell the de­cline in Snap shares.

Most em­ployee-share­hold­ers are free to be­gin sell­ing shares Mon­day. Fi­nan­cial ex­perts say most work­ers plan to hold on to their shares un­til prices rise, but there al­most cer­tainly will be some sell­ing. The in­creased sup­ply threat­ens to hold down prices.

Over­all, an­a­lysts es­ti­mate Snap will see a mod­est in­crease in sales and sim­i­lar us­age growth when com­pared with the first quar­ter. Snap doesn’t pro­vide guid­ance about its ex­pected per­for­mance.

Snap de­buted on the New York Stock Ex­change at $17 in March. Shares closed at $13.56 on Wed­nes­day, up 4%, or 54 cents.

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