Quarterly earnings reports provide crucial insights into a company’s trajectory, particularly when benchmarked against competitors within its industry. Today, we focus on Snap (NYSE: SNAP) and evaluate both top and bottom performers in the social networking sector.
Adapting to changing consumer habits has become paramount for businesses, particularly as social networks have evolved into primary platforms for customer engagement over the past decade. In 2020, daily social network usage averaged more than 2.5 hours per user, marking a steady annual increase since tracking began. Consequently, companies are increasingly allocating their advertising and promotional budgets to online channels.
The five social networking stocks we monitor had a decent Q1, with revenues generally surpassing analyst predictions by an average of 3.5%. Looking ahead, their revenue forecasts for the next quarter are 1.3% higher than consensus estimates. Growth stocks, which prioritize future cash flows, closed out 2023 strongly but have faced increased stock market volatility in early 2024 due to mixed inflation data. Despite this, social networking stocks have shown robust performance, with their average share prices rising by 13.6% since the last earnings report.
Best Q1: Snap (NYSE:SNAP)
Snap (NYSE: SNAP) led the pack with the best Q1 performance. Originally known as Picaboo and founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, Snapchat reported revenues of $1.19 billion, a 20.9% year-on-year increase, exceeding analysts’ expectations by 6.6%. CEO Evan Spiegel attributed the strong financial results to the company’s ability to enhance value for both its community and advertising partners.
Snap achieved the largest beat of analyst estimates among its peers, driven by reporting 422 million daily active users, marking a 10.2% increase from the previous year. Since the earnings release, Snap’s stock has risen by 34.6%, currently trading at $15.35.
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Pinterest (NYSE:PINS)
As for Pinterest (NYSE: PINS), the platform was conceived to digitally replace traditional catalogues. Pinterest reported revenues of $740 million, up 22.8% year-on-year, exceeding analysts’ forecasts by 5.7%. The company had a strong quarter, with optimistic sales projections for the next quarter and notable user growth.
Pinterest has seen its stock rise by 31.4% since reporting its latest earnings, currently trading at $43.98.
Weakest Q1: Yelp (NYSE:YELP)
As for Yelp (NYSE: YELP), founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, the platform helps users discover local businesses through crowd-sourced reviews. Yelp reported revenues of $332.8 million, a 6.5% increase year-on-year, slightly missing analysts’ expectations by 0.2%. The quarter showed mixed results for Yelp, with revenue growth slowing and falling short of Wall Street’s projections. However, adjusted EBITDA exceeded expectations.
Meta (NASDAQ:META)
Meta Platforms (NASDAQ: META), famously founded by Mark Zuckerberg, operates major social networks like Facebook, Instagram, WhatsApp, and Messenger, alongside its Reality Labs focused on the metaverse. Meta reported revenues of $36.46 billion, a 27.3% increase year-on-year, meeting analysts’ expectations. Despite strong revenue growth, the company provided underwhelming guidance for the next quarter. Meta’s stock has risen 1.5% since the earnings release, trading at $501.24.
Nextdoor (NYSE: KIND) connects neighbors and local businesses through its social network, reporting revenues of $53.15 million, up 6.8% year-on-year, surpassing analysts’ expectations by 4.6%. The quarter showed promising revenue guidance, though revenue growth was modest. Nextdoor’s stock has risen 9.5% since the results, currently trading at $2.47.