Snap stock jumps 9% on Q3 results beat; analysts remain cautious

Investing.com -- Snap reported Tuesday third-quarter results that beat estimates, underpinned by stronger-than-expected user growth, and the social media company launched a $500 million share buyback program.

Snap Inc (NYSE:SNAP ) jumped around 9% in premarket trading Wednesday. 

Snap reported adjusted earnings per diluted share of $0.08 on revenue of $1.37B, topping Wall Street estimates for adjusted EPS of $0.08 on revenue of $1.36B.

The social media company's Q3 EBITDA stood at $132 million, well above the estimated $92 million.

Ad and Snapchat+ revenues jumped around 9% and 173% year-over-year, respectively.

Moreover, the Direct Response (DR) revenue surged 16%. According to Bank of America analysts, this growth was "driven by strong demand for 7-0 Pixel Purchase optimization solutions and growing contribution from App Purchase optimization."

However, they also noted that the DR growth "is being offset by share loss in brand ad spend, while app transition to “Simple Snapchat” adds usage/rev. uncertainty over next 2 quarters."

The bank reiterated a Neutral rating on Snap shares due to limited user growth in US and EU markets, slowing Snapchat+ subscriber growth, near-term uncertainty on app transition, and premium valuation based on bottom-line metrics. 

RBC Capital Markets analysts shared similar remarks, noting that while accelerating DR growth is encouraging, they look for "better evidence of new ad units or UX driving incremental spend or engagement before we can get more constructive with our rating."

Snap's daily active users during the quarter jumped by 37M, or 9%, to 443M, topping analyst estimates of 441M, taking total time spent on the platform up 25% in Q3 from the same period a year earlier. 

The company also launched a share buyback program of up to $500 million of its common stock.

Yasin Ebrahim contributed to this report. 

 

Source: Investing.com