Snapchat (SNAP) just reported 3Q22 earnings and the stock is cratering. It is currently -25% in the after hours. And I’m shocked because I actually thought it was a good report! What seems to be unnerving investors is SNAP’s guidance of flat revenue growth for 4Q22. I can’t for the life of me understand why this is such a shock given that 4Q21 was a monster and therefore an extremely tough comp. Plus we all know the macro environment is deteriorating.
Every other metric came in better than expected and supports the thesis that SNAP will get through this. 3Q22 Daily Active Users (DAUs) increased to 363 million from 347 million a quarter ago and SNAP expects them to further increase to 375 million in 4Q22. SNAP’s Adjusted EBITDA of $73 million and Non-GAAP EPS of 8 cents blew away expectations. And 4Q22 Adjusted EBITDA guidance of $200 million is excellent in my opinion.
In sum, it’s a brutal macro environment and advertisers are cutting back but SNAP is executing well and its popularity with the younger generations will make it a winner in the long term. The stock is acting like the company is going bankrupt but they actually turned a small profit and were Free Cash Flow positive for the quarter. They also have $4.4 billion of cash and marketable securities on their balance sheet. Call me crazy – and many will call me much worse – but I’ll likely be backing up the truck tomorrow.