Takeaway: We believe estimates are still too high for 2018, but suspect SNAP may be able to edge out 4Q17 estimates.

KEY POINTS

  1. 4Q17 Within Reason: We suspect consensus estimates may be inadvertently overcompensating for the Olympic comp drag, which we estimate suppressed revenue growth by 25 percentage points in 3Q17.  After running through the numbers, we now suspect that SNAP could edge ahead of 4Q revenue growth estimates given the same seasonality dynamics that prevented it from doing so over the past two quarters.  The street is looking for 22% q/q revenue growth in 4Q.  Once again using TWTR as a comp, that is lower than anything TWTR has ever reported for 4Q q/q growth prior to its restructuring.   Note that we're not suggesting a 4Q beat is a given, especially considering SNAP's relatively lackluster sequential revenue growth in the prior quarter, but we do see it as a risk on the short side into the print.
  2. 2018 Not So Much: Consensus is effectively flat-lining SNAP's revenue growth trajectory through 4Q18, which in itself implies accelerating ARPU growth through 2018; that is unless SNAP can sustain or reaccelerate its (DAU) growth this year.  On that note, we suspect that the older millennial cohort may be increasingly fading the platform, albeit that is an anecdotal callout based on a growing number of conversations we've been having with current/prior users.  We are in the process of replicating our 2Q17 SNAP survey to test our thinking here (prior results below), but if true, we doubt SNAP could sustain or reaccelerate its DAU growth since the older cohorts (25+) represent both the bulk of SNAP's remaining user TAM and a considerable portion of its DAUs based on the latest data we have from the company.   

SNAP | Thoughts into 2018 - SNAP   Q Q Growth vs. TWTR 4Q
SNAP | Thoughts into 2018 - SNAP   Consensus 4Q17
SNAP | Thoughts into 2018 - SNAP   US CAN DAU
SNAP | Thoughts into 2018 - SNAP   US DAU Distribution
SNAP | Thoughts into 2018 - SNAP 2Q17 Survey 1      

Let us know if you have any questions or would like to discuss in more detail.

Hesham Shaaban, CFA
Managing Director


@HedgeyeInternet