Snap’s stock (NYSE: SNAP) has lost approximately 76% YTD as compared to the 12% drop in the S&P500 index over the same period. That said, at its current price of $11, it is trading 39% below the fair value of $18 – Trefis’ estimate for Snap’s valuation.
The company posted weak results in the second quarter of 2022, with revenues and earnings missing the consensus estimates. It reported total revenues of $1.11 billion – up 13% y-o-y. The growth numbers were quite below the levels seen last year because of a decline in digital advertising budgets in several sectors. Notably, businesses are reassessing their digital spending due to the tough macroeconomic scenario. This was also evident from the drop in average revenue per user (ARPU) from $3.35 to $3.20 in the quarter. On the flip side, the firm did witness an 18% y-o-y growth in daily active users (DAU). Overall, the net loss further increased from $151.6 million to $422.1 million in Q2. It was primarily due to an unfavorable increase in total cost & expenses as a % of revenues from 120% to 136%.
SNAP mainly generates revenue which includes Snap Ads and Augmented Reality Ads. It reported a 64% y-o-y jump in revenues to $4.1 billion in 2021. However, the growth rate has slowed down in 2022. The revenues for the first half of 2022 increased 24% y-o-y to $2.2 billion. Further, its net loss increased from $438.5 million to $781.7 million due to higher expenses. Moving forward, we forecast Snap’s revenues to touch $4.6 billion in FY2022. Additionally, SNAP’s revenue per share (RPS) is likely to improve to $2.81, which coupled with a P/S multiple of just above 6x will lead to the valuation of $18.
|S&P 500 Return||2%||-12%||88%|
|Trefis Multi-Strategy Portfolio||6%||-8%||261%|
 Month-to-date and year-to-date as of 8/12/2022
 Cumulative total returns since the end of 2016
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