As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the social networking industry, including Snap (NYSE:SNAP) and its peers.
Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.
The 5 social networking stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 2.2% while next quarter’s revenue guidance was 0.9% above.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
While some social networking stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 4.6% since the latest earnings results.
Weakest Q2: Snap (NYSE:SNAP)
Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.
Snap reported revenues of $1.24 billion, up 15.8% year on year. This print fell short of analysts’ expectations by 1.1%. Overall, it was a slower quarter for the company with underwhelming revenue and EBITDA guidance for the next quarter.
“Our community grew to reach more than 850 million monthly active users in Q2, with more than 11 million Snapchat+ subscribers,” said Evan Spiegel, CEO.
Snap Total Revenue
Snap delivered the weakest performance against analyst estimates of the whole group. The company reported 432 million daily active users, up 8.8% year on year. Unsurprisingly, the stock is down 19.7% since reporting and currently trades at $10.28.
Helping residents figure out what's happening on their block in real time, Nextdoor (NYSE:KIND) is a social network that connects neighbors with each other and with local businesses.
Nextdoor reported revenues of $63.29 million, up 11.3% year on year, outperforming analysts’ expectations by 8.5%. The business had a very strong quarter with an impressive beat of analysts’ EBITDA estimates and optimistic revenue guidance for the next quarter.
Nextdoor Total Revenue
Nextdoor achieved the biggest analyst estimates beat among its peers. The company reported 45.1 million monthly active users, up 8.4% year on year. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 10% since reporting. It currently trades at $2.26.
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
Pinterest reported revenues of $853.7 million, up 20.6% year on year, in line with analysts’ expectations. It was a mixed quarter as it posted a decent beat of analysts’ EBITDA estimates but underwhelming revenue guidance for the next quarter.
As expected, the stock is down 14.4% since the results and currently trades at $31.96.
Founded by PayPal alumni Jeremy Stoppelman and Russel Simmons, Yelp (NYSE:YELP) is an online platform that helps people discover local businesses through crowd-sourced reviews.
Yelp reported revenues of $357 million, up 5.9% year on year. This number beat analysts’ expectations by 1.1%. Overall, it was a strong quarter as it also produced an impressive beat of analysts’ EBITDA estimates.
Yelp had the slowest revenue growth among its peers. The stock is flat since reporting and currently trades at $33.61.
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Meta reported revenues of $39.07 billion, up 22.1% year on year. This number topped analysts’ expectations by 2%. Overall, it was a strong quarter as it also recorded an impressive beat of analysts’ EBITDA estimates and strong sales guidance for the next quarter.
Meta pulled off the fastest revenue growth among its peers. The company reported 3.27 billion daily active users, up 6.5% year on year. The stock is up 20.7% since reporting and currently trades at $572.47.
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