5 Takeaways From Snap's Q1

JPMorgan's Doug Anmuth maintains a Neutral rating on Snap Inc SNAP but with a price target lowered from $24 to $20 after the company reported its first ever earnings report as a public company.

Anmuth's revised price target and Neutral stance are based on five key takeaways from the earnings report.

1. Revenue Versus DAUs

Anmuth believes the 20-percent plunge in Snap's stock is attributed to revenue concerns rather than daily active user metrics. Specifically, DAU net adds during the quarter rose from 5 million in the prior quarter to 8 million and were in line with expectations. But analysts were expecting the company to report revenue of around $170 million so the reported $149.64 million was notably short of expectations.

2. Early In The Game

Snap's user base consists of 166 million users that spend on average 30 minutes a day on the platform. Meanwhile, the social media company has been monetizing its platform for just two years and management is working hard on tripling its workforce to improve its metrics, although this will take time.

3. Progress Is Apparent

During the quarter, Snap's users created 3 billion Daily Snaps which marks an improvement from 2.5 billion in the third quarter of 2016. Meanwhile, Stories in Search recently launched and Snap Ads are now available through self-serve.

4. Hosting Costs

Snap also said in its report that its hosting costs declined quarter-over-quarter at a time when engagement increased. Moving forward, hosting cost leverage will become more important to the company as monetization improves.

5. Expiration Dates

Finally, the analyst noted attention will shift to Snap's July-August lock-up expiration. The company's 150- and 180-day lock-up expiration that kicks in at the end of July implies around 84 percent of shares outstanding will theoretically become available for sale.

The Bottom Line

Bottom line, the analyst's view on the company remains mostly unchanged following the report. At the end of the day, the company boasts an "increasingly competitive" social media platform but is unlikely to make a profit until at least 2019. As such, a Neutral rating is most appropriate for the time being.

At last check, shares were down 19.8 percent at $18.43.

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