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Stock Analyst Update

Snap’s Strong Q2 Results Indicate Digital Ad Strength

Growth in Snap’s user count and user monetization were also impressive. We have increased our fair value estimate.


While we’ve been expecting digital advertising to accelerate this year, Snap’s (SNAP) second-quarter results were still very impressive. Both the top and bottom lines easily surpassed our internal projections and FactSet consensus estimates. We have increased our fair value estimate to $74 (from $68) as we believe Snap continues to progress toward providing full-funnel offerings to advertisers of all sizes, which should help retain clients and drive higher ad spending by each. Snap executed well during the pandemic as it enhanced its direct-response offerings, whose growth is now accompanying the resurgence of brand advertising. Growth in Snap’s user count and user monetization were also impressive.

The stock jumped nearly 17% in after-hours trading, leaving it at only a slight discount to our latest valuation. We recommend a wider margin of safety for new investors.

Total revenue jumped 116% from the pandemic-ridden second quarter of 2020 to $982 million as daily active users increased 23% to 293 million and monthly per-user monetization (ARPU) increased 75% to $3.35. Continuing strong demand for direct response campaigns, along with recovery in more broad-based campaigns, drove ARPU in North America up 117% to $7.37, which when combined with 6% user growth resulted in revenue growth of 129%. Revenue in Europe and other markets surged 94% and 86%, respectively, driven by 10% and 56% user growth and 77% and 20% increases in ARPUs.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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