From Growth Targets To Headcount Cuts, Analyst Reviews Snap's Roadmap To 2024

Benchmark analyst Mark Zgutowicz reiterated the Hold rating on Snap Inc. SNAP.

A company letter from Snap CEO Evan Spiegel to employees outlining the company's goals for 2024 was in the headlines yesterday, which underscored +20% YoY full-year Ads revenue growth. 

Following leaked financial goals from Spiegel's annual Sep. letter, the analyst expects the company's 3Q earnings call to shift from muted 2H23E performance to the viability of its '24 offensive playbook. 

The analyst raised several questions concerning each target. The +20% growth target implies ~$5.4 billion '24E revenue (on' 23E consensus revenue) or +5.7% above' 24E consensus.

The analyst is particularly curious about what incremental revenue, if any, is anticipated from DR stack rebuild.

In addition, Zgutowicz is interested in why the revenue (and DAU) target suggests sub-4 % total ARPU growth.

Snap announced 20% headcount cuts in Sep. '22, ~1280 of its 6400 employees at the time. Another 150 AR division cuts were speculated in Sep. '23, the analyst adds.

Per the latest company letter that hints at a $500 million adjusted EBITDA, the analyst questioned whether additional headcount cuts are required to hit the target.

The company's 14 million Snapchat+ users and $500 million non-ads revenue, represent 3%/9% of respective '24E DAU/revenue targets, the analyst notes. 

However, the analyst questioned how much DAU penetration is realistic over the next 2-3 years. 

Based on the above, the analyst raised the FY24 EBITDA estimate from $220.2 million to $275.6 million.

The analyst increased the FY24 revenue estimate from $5.002 billion to $5.096 billion.

The analyst noted the company will fall well short of its '23E revenue ($6 billion) and FCF ($1 billion) targets from last year's letter.

Price Action: SNAP shares are trading lower by 0.51% to $9.67 on the last check Tuesday.