SNAP Implodes Again After Forecasting First Ever Revenue Decline
For the fifth quarter in a row, SNAP stock craters after the company reports devastating earnings. But this one really hurts, because by now even the bears expected that all the bad news had been flushed out. Boy, were they wrong.
Having plunged six months ago after projecting its worst revenue growth on record, a shock revelation which took the stock some 25% lower, and tumbling again three months ago ago when the company reported another ugly quarter, SNAP is down double digits once again, tumbling from the mid-$11s to just below $10 after the former “growth” company forecast its first ever revenue decline.
Which is not to say that its historical data was any good. Here is how the company did in yet another catastrophic quarter:
Revenue $1.30 billion, +0.1% y/y, missing the estimate $1.31 billion
North America revenue $880.3 million, -5.6% y/y, estimate $923.5 million
Europe revenue $218.6 million, +4.6% y/y, estimate $201.4 million
Rest of the world revenue $200.9 million, +28% y/y, estimate $180 million
Adjusted EPS 14c vs. 22c y/y, beating the estimate 11c
Adjusted EBITDA $233.3 million, -29% y/y, beating the estimate $207 million
There was some good news in the daily active users, which at 375 million, or up +18% y/y, actually beat estimate 374.7 million, but not thanks to North America:
North America daily active users 100 million, +3.1% y/y, missing estimate 100.9 million
Europe daily active users 92 million, +12% y/y, estimate 89.7 million
Rest of world daily active users 183 million, +31% y/y, estimate 184.7 million
Tragically, in a time when tech companies are firing everyone, SNAP still uses the same colorblind graphic designer.
Of course, with (just barely) more users than expected yet missing on revenue, it meant just one thing: the monetization disappointed and sure enough, ARPU of $3.47, was not only 15% lower vs 2021, but missed estimates of $3.49
North America average revenue per user $8.77, -8.5% y/y, estimate $9.16
Europe average revenue per user $2.38, -6.3% y/y, estimate $2.25
Rest of world average revenue per user $1.10, -1.8% y/y, estimate 99c
But while historical data was bad, it’s what the company disclosed about the present and, worse, the future that shocked markets: specifically, while the company disappointed quarter-to-date revenue is already down about 7% Y/Y, the final straw before everyone hit the sell button is that the company’s forecast assumes revenue will decline between -10% to -2% in the first quarter.
Not only is that below the average analyst estimate for growth of 1.48%, but it is Snapchat’s first every quarterly negative revenue guidance.
Knowing that its stock would soon be in the single digits, it barely tried to put lipstick on a pig and instead just gave token lip service to Q1 guidance, saying that “given the work we have completed to reprioritize our cash cost structure, we believe we have a path to adjusted EBITDA breakeven in Q1.”
Whatever. Meanwhile, the company is now a melting ice cube, and the stock reflects it with SNAP plunging back into the single digits after hours.
WTI Holds Gains After API Reports Across-The-Board Inventory Builds
Oil prices rallied on the day, with WTI rebounding back above $79 as factors ranging from the end of the Fed’s (dovish) rate increases to swelling demand in China give bulls more ammunition.
“The main driver for oil lately has been the potential for a resurgence of oil demand out of China, which may continue into February considering how Chinese economic momentum picked up in the overnight PMI reports,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
The nationwide ‘deep freeze’ has clearly been impacting the inventory data over the last few weeks. We suspect today could be the first ‘clean’ indication…
API
Crude +6.33mm (-1mm exp)
Cushing +2.72mm
Gasoline +2.73mm
Distillates +1.53mm
Crude inventories built for a 5th straight week (despite expectations for a small draw) with Cushing stocks soaring once again. On the product side, we also saw notable builds (with Distillates biggest rise since the first week of December)…
Source: Bloomberg
Additionally, AlphaBBL data suggests that crude inventories at Cushing climbed 2.1 million barrels in the last week.
WTI was trading around $79 ahead of the API print and managed to hold those gains despite the builds…
The OPEC-plus group including Russia meets tomorrow and while most analysts don’t expect major policy shifts, energy investors are always slightly on edge ahead of OPEC gatherings.
Freeport LNG Makes Progress Towards Partial Restart With Key FERC Request
Freeport LNG, the second largest US liquefied natural gas exporter, reported Tuesday afternoon to the Federal Energy Regulatory Commission (FERC) that it has “successfully and safely progressed the cooldown of the Loop 1 transfer piping and reinstatement of BOG management.”
Freeport LNG asked FERC for approval to begin “(1) the nitrogen cooldown of the LNG rundown piping system and (2) the introduction of hydrocarbons to Unit 13 (Train 3) for LNG train commissioning and cooldown.” They also asked for a response from the federal energy agency by tomorrow.
Combing through Freeport’s letter to FERC, Houston-based energy firm Criterion Research told clients, “the key part of this request is that it would allow Freeport to begin flowing natural gas into the pretreatment facility and then permit the initial production of LNG to flow into LNG Tanks 1 and 2 onsite.”
Freeport also said that “subsequent approvals will be necessary to commence Loop 1 LNG circulation and ship loading to Dock 1, as well as the transition of Unit 13 into full, commercial operations.”
The next steps for Freeport LNG will be to (1) secure approval from the FERC to begin feed gas flow & initial liquefaction operations, (2) complete that startup, and (3) request subsequent approval to commence LNG circulation and ship loading to Dock 1 #natgas#ongt#LNG#enelystpic.twitter.com/SShFMhfSMw
Natural gas flows to the LNG terminal increased today, much larger than in the previous weeks.
Even with the prospects of a partial restart at the second largest US terminal, NatGas prices have slid to 20-month lows due to unseasonably warm weather, increased production, and an abundance of supply.
As of Tuesday afternoon, NatGas prices have yet to bounce even on this news and reports of colder air pouring into the Lower 48.
Cosmetics company NYX Professional Makeup has received backlash on social media after featuring ads for a lipstick with bearded men.
The company appears to be finding out that going woke eventually equates to going broke, as respondents accused them of “erasing women” with the ads for Smooth Whip lip cream.
In an Instagram post, the company wrote the caption “[itsmechrxs] making us whip out our Smooth Whip in Pom Pom REAL quick. #nyxcosmetics #nyxprofessionalmakeup #crueltyfree.”
“Apparently you don’t need us as your customer base any longer. I’ll leave [your] product like you left me Tired of being marginalized!!!!!!” one women replied.
Another responded “Not attractive at all… Doesn’t make me want to run out and buy your products EVER.”
“…DOESNT matter what year it is dude. Men are men and women are women stop trying to erase us,” another women asserted.
“You need to wake up. Stand up for your right as a woman,” another added, claiming “This is another example of men wanting to still be in control.”
“I’m so turned off by these ads with men wearing lipstick,” another person wrote.
“Not good for your company using a man what are you thinking boycotting,” another commented, while someone else bluntly responded “men should not wear makeup. This is gross.”
Another woman responded “I’m not so much disgusted but confused, why just put a picture with a man wearing lipstick and not a woman too? How does this ad make me want to buy [your] product when I can’t relate to it … I get makeup is for everyone so why not?”
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IMF Upgrades Global Growth Forecast As Inflation Cools
The International Monetary Fund published its latest World Economic Outlook on Monday, painting a slightly less gloomy picture than three and a half months ago, as inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis following Russia’s invasion of Ukraine has been less severe than initially feared.
However, the IMF predicts the slowdown to be less pronounced than previously anticipated.
Global growth is now expected to fall from 3.4 percent in 2022 to 2.9 percent this year, before rebounding to 3.1 percent in 2024.
The 2023 growth projection is up from an October estimate of 2.7 percent, as the IMF sees far fewer countries facing recession this year and does no longer anticipates a global downturn.
One of the reasons behind the cautiously optimistic outlook is the latest downward trend in inflation, which suggests that inflation may have peaked in 2022.
The IMF predicts global inflation to cool to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent, but significantly lower than the 8.8 percent observed in 2022.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post released along with the report.
“Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.”
The risks to the latest outlook remain tilted to the downside, the IMF notes, as the war in Ukraine could further escalate, inflation continues to require tight monetary policies and China’s recovery from Covid-19 disruptions remains fragile. On the plus side, strong labor markets and solid wage growth could bolster consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for more monetary tightening.
In conclusion, Gourinchas calls for multilateral cooperation to counter “the forces of geoeconomic fragmentation”.
“This time around, the global economic outlook hasn’t worsened,” he writes. “That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.”
However, just because the ‘trend’ has shifted doesn’t mean it’s mission accomplished…
That looks an awful lot like Central Bankers’ nemesis remains – global stagflation curb stomps the dovish hopes.
Mark Houck, 48, was acquitted yesterday in a high-profile prosecution by the Biden Administration under the Freedom of Access to Clinic Entrances (FACE) Act. Houck was accused of pushing a Planned Parenthood escort during a clash outside an abortion clinic. It is a rare victory for Houck and the Thomas More Society (which represented Houck) under the act. Houck insisted that he was trying to protect his twelve-year-old son in the encounters with Love. There is also an interesting wrinkle in the jury deliberations.
The FACE Act prohibits “violent, threatening, damaging, and obstructive conduct intended to injure, intimidate, or interfere with the right to seek, obtain, or provide reproductive health services.”
The Biden Administration alleged that Houck “forcefully shoved” Bruce Love, a 72-year-old volunteer at a Philadelphia Planned Parenthood on Oct. 13, 2021. The trial explored two different encounters with Love.
In the first encounter, Houck was across the street on a sidewalk counseling two women who had left the Planned Parenthood clinic. Love followed the women. The Justice Department says that Houck elbowed Love because he was a clinic escort. Houck testified that Love startled him and made contact with him, causing him to say “What are you doing?” and hip-check him out of reflex.
Houck testified that he told Love to “Stay away from my son” and “Don’t come near us” when Love approached them on the sidewalk after the first incident.
His son, Houck Jr. also testified and said that Love stood close to him as he taunted his father saying “You’re hurting women. You don’t care about women.” He then said Love said the same to him and added “Your dad’s a bad person. Your dad’s harassing women.” He said that he moved away from Love out of fear.
It was a highly contested account, but the Biden Administration decided to prosecute and later went to Houck’s home to arrest him. The arrest drew criticism after a large number of FBI agents descended on the home.
What was interesting is that the jury previously declared itself deadlocked and was sent home on Friday. However, a juror was then reportedly replaced by an alternate juror on Monday afternoon. They then quickly reached an acquittal. It is not clear if the deadlock was due to that one juror, but a consensus that formed during that day.
It is not uncommon for jurors to overcome a deadlock, particularly after an Allen charge. Named after the United States Supreme Court case Allen v. United States (1896) where it was first used, it is called the “dynamite charge” to break deadlocks. It is unpopular with most defense attorneys because it encourages the majority to work to convince the minority — often breaking down the resistance of holdouts.
It is not clear if the jury simply overcame its divisions after a weekend break or whether the replaced juror was a holdout.
The acquittal in a FACE Act case is relatively rare given the “cut-and-dry” language of the law.
We recently discussed an English case that showed its own efforts against pro-life protesters when a woman was arrested for praying near a clinic.
Punxsutawney Phil will make his annual prediction on the prospects for an early spring this Thursday, February 2nd, and my guess is that he will see his shadow indicating six more weeks of winter. At least, that is what I would recommend to my fellow Pennsylvania prognosticator. There are processes unfolding in the upper part of the atmosphere over the polar region of the northern hemisphere that suggest there may very well be additional cold air outbreaks for much of the nation as we head through February and into March. In fact, a brutally cold air mass is headed to the Northeast US for Friday into Saturday with zero degrees on the table in New York City.
One part of the country that may not be vulnerable to cold air outbreaks in coming weeks is the Southeast US and, in particular, the state of Florida where a persistent upper-level ridge may keep it warm right into spring training season. In addition to the prospects for more cold, the overall weather pattern should remain quite active as well across the nation with numerous rain/snow/ice events on the way. Even the state of California – which has experienced a break in the action for the past ten days or so – will see a stormier pattern return to the region in early February; especially, the northern half.
The month of January is likely headed to a finish that will result in it turning out to be the 2nd or 3rd warmest on a nationwide basis compared to any in the last 40 years. This unusually warm month of January has been quite a contrast to December which featured some bitter cold air masses across the nation including one that arrived in the Mid-Atlantic region just in time for the Christmas Eve/Christmas weekend. Each of these past two months has been quite active with multiple storm systems impacting many parts of the country. In particular, the state of California was pummeled by ocean storms in the period from late December to around the third week of January. Looking ahead, one change in the upper atmosphere over the polar region of the Northern hemisphere suggests that cold air outbreaks can continue for much of the nation into February and the active weather pattern is likely to continue with multiple storms on the horizon bringing more rain, ice or snow.
One way to monitor the potential for wintertime Arctic air outbreaks into the central and eastern US is to track the temperature pattern in the stratosphere over the polar region of the Northern Hemisphere. The stratosphere is the second major layer of the atmosphere just above the troposphere and below the mesosphere. It occupies the region of atmosphere from about 12 to 50 km, although its lower boundary tends to be higher nearer the equator and lower nearer the poles. The stratosphere defines a layer in which temperatures rise with increasing altitude. At the top of the stratosphere, the thin air may attain temperatures close to 0°C. This rise in temperature is caused by the absorption of ultraviolet (UV) radiation from the sun by the ozone layer. Such a temperature profile creates very stable atmospheric conditions and the stratosphere lacks the air turbulence that is so prevalent in the troposphere. Consequently, the stratosphere is almost completely free of clouds or other forms of weather.
Sudden stratospheric warmings (SSWs) are among the most impressive dynamical events in the physical climate system. During the winter months in the polar stratosphere, temperatures are typically at or below minus 70°C. The cold temperatures are combined with strong westerly winds that form the southern boundary of the stratospheric polar vortex which plays a major role in determining how much Arctic air spills southward toward the mid-latitudes. This dominant structure is sometimes disrupted in some winters by being displaced, split apart or even reversed. Under these circumstances, the winds can decrease or change directions and the temperatures in the lower stratosphere can rise by more than 50°C in just a few days.
In response to the stratospheric warming (and associated layer expansion) at the high latitudes, the troposphere cools down dramatically (with layer contraction) at the high latitudes and pressure rises. This tropospheric cold air can then be more easily transported from the high latitudes to the middle latitudes given the “high-latitude blocking” that often sets up over places like Greenland and northeastern Canada. The entire process from the initial warming of the stratospheric at high latitudes to the cooling in the troposphere at middle latitudes can take several weeks to unfold. [For more information on the stratospheric warming phenomenon visit our “Meteorology 101” page for an extended video discussion on the topic].
Current stratospheric warming event
During the middle part of January, the polar vortex normally positioned near or over the North Pole began to get “stretched out” and two separate warming areas began to show up aloft. By the last week of January, a significant area of warming developed at stratospheric levels over the Siberia region of the Northern Hemisphere and the polar vortex was displaced a bit away from its prior location. By the early part of February, this area of warming is expected to rotate to a position centered right near the North Pole and the polar vortex will become displaced and shrunk in size compared to the way it looked a few weeks ago. This stratospheric warming event is likely to result in the displacement of cold air masses from the high latitudes into the middle latitudes during February and perhaps even into March – delaying the start of spring in much of the nation. The one exception to this outlook may be the Southeast US and, in particular, the state of Florida which may enjoy warm weather from now right into the spring training season thanks in large part to the stubborn high pressure ridge aloft in that part of North America.
Active pattern to continue with rain, ice and snow
In addition to the prospects for more cold air outbreaks across much of the nation, the overall weather pattern is likely to remain quite active in coming weeks. Upper-level high pressure ridging is likely to remain centered over the southwestern Atlantic/Southeast US – typical of La Nina winters – and this will present a natural temperature gradient with colder-than-normal air to be centered over the central US. This “battleground” region in between the ridge (mild) to the south and east and the upper-level low (cold) to the north and west has been and will continue to be a conduit for the movement of low pressure systems to move from the south-central states to the Northeast US. Out west, California has experienced a break in the action during the last ten days or so, but a stormier pattern is likely to return to the Golden State beginning early in February; especially, the northern half.
Putin Establishes Joint Military Training Centers With Belarus
President Vladimir Putin on Tuesday signed a decree ordering the establishment of joint military training centers with Belarus, in a potential sign that Russia’s ‘Union State’ ally under Alexander Lukashenko is preparing to join the Ukraine invasion, which is soon to hit its one year mark by the end of February.
“In a decree published Tuesday, Putin tasked the defense and foreign ministers to conduct talks with Belarus and sign an agreement to establish the facilities,” the AFP reports. “The document did not specify where they would be based.”
Currently, Moscow and Minsk are participating in joint air force drills which are scheduled to last until Feb. 1st, and there’s been an increase in Russian top level official visits to Belarus of late.
Putin had made a rare visit to Belarus on Dec.19, where he met with President Lukashenko in Minsk, and the two discussed the formation of a “unified defense space” – but no details were offered in terms of operational details involved in implementing such a plan.
Ukraine has meanwhile continued to fear that the Kremlin’s next escalation and potential large-scale mobilization could involve the formal entry of Belarus into the war. Lukashenko had at the start of the invasion allowed Russian troops to use his territory as a launching pad.
Last week there were reports that Kiev offered Belarus a ‘non-aggression’ pact, which is without doubt geared toward preventing a feared Belarusian cross-border offensive. This also came amid claims that Russia is launching drones against Ukraine’s energy infrastructure from Belarus.
Lukashenko had confirmed Ukraine’s offer last week:
“On the one hand, they ask us not to fight Ukraine under any circumstances, not to move our forces there. They offer us to sign a non-aggression pact,” Lukashenko told officials in a meeting in Minsk, according to the Belta state news agency. On the other hand, Ukraine has been training and arming people to fight Belarus, he added.
⚡️Pictures from today’s joint air drills between Belarus and the Russian federation, somewhere in southern Belarus. pic.twitter.com/VJTb2UnAcU
He again denied that there are any plans to send Belarusian troops into Ukraine, but he’s also remained a staunch defender of Putin’s order for Russia to invade, and has called out the “completely insane” actions of nearby NATO countries such as Poland and Lithuania.
The cost to fuel electric vehicles in the United States is higher than gas-powered cars for the first time in 18 months, a consulting company said.
“In Q4 2022, typical mid-priced ICE (Internal Combustion Engine) car drivers paid about $11.29 to fuel their vehicles for 100 miles of driving. That cost was around $0.31 cheaper than the amount paid by mid-priced EV drivers charging mostly at home, and over $3 less than the cost borne by comparable EV drivers charging commercially,” Anderson Economic Group (AEG) said in an analysis.
However, luxury EVs still enjoy a cost advantage against their gas-powered counterparts.
It costs luxury EV owners $12.4 to drive every 100 miles on average if they charge their cars mostly at home or $15.95 if they charge their cars mostly at commercial charger stations in the 4th quarter of 2022.
Meanwhile, the fuel costs for luxury gas-powered cars are $19.96 per 100 miles on average.
AEG is a consulting firm based in Michigan that offers research and consulting in economics, valuation, market analysis, and public policy, according to the company’s website.
The fuel costs in the analysis are based on real-world U.S. driving conditions including the cost of underlying energy, state taxes charged for road maintenance, the cost of operating a pump or charger, and the cost to drive to a fueling station, AEG said.
Insurers List Crashed Low-Mileage Tesla on Auctions: Analysis
Insurance carriers are sending low-mileage Tesla Model Ys to salvage auctions because they are too expensive to repair.
Of more than 120 Model Ys that were totaled after collisions, then listed at auction in December and early January, the vast majority had fewer than 10,000 miles on the odometer, according to a Reuters analysis based on online data from Copart and IAA, the two largest salvage auction houses in the United States.
Copart and IAA auction listings note whether the vehicles were involved in front, rear, or side collisions, and typically include after-crash photos of each vehicle. But the listings do not disclose specific details on the type of damage suffered.
Copart listings in some cases included the names of insurance companies that had bought back crashed vehicles, then listed them at auction. Those companies include State Farm, Geico, Progressive, and Farmers. Geico is part of Warren Buffet’s Berkshire Hathaway Inc.
Biden Family Corruption, COVID Origins, Weaponized Government, And Border Crisis: House GOP Kicks Off Investigations
Newly empowered House Republicans are kicking off their long-planned investigations into a wide variety of issues, beginning with hearings on the US-Mexico border crisis, the origins of Covid-19, and pandemic relief programs.
The House Judiciary Committee’s first meeting of the new Congress, led by Chairman Jim Jordan (R-OH), will be “The Biden Border Crisis: Part I.”
Then, the House Energy and Commerce investigations subcommittee will hold a hearing titled: “Challenges and Opportunities to Investigating the Origins of Pandemics and Other Biological Events,” as part of its probe into the origins of Covid-19.
Meanwhile, the House Oversight and Accountability Committee, led by James Comer (R-KY) will kick off a hearing on waste, fraud and abuse related to federal pandemic spending, The Hill reports.
“I don’t think history will be kind to the PPP loan program,” said Comer during a Monday appearance at a National Press Club event, referring to the program that provided businesses with forgivable loans. “I think it’ll be eventually viewed in the same manner that the big bank bailouts were when people find out where a lot of that money was going.”
Republicans had been plotting extensive investigations into the Biden administration for more than a year before the midterm elections. Speaker Kevin McCarthy (R-Calif.), in preparation for taking the House majority, organized GOP members into “task forces” to come up with oversight and legislative priorities. Republican members of committees started investigations last year when they were in the minority.
Republicans now have control over committee hearing topics, a better chance of getting answers from administration officials, and are armed with subpoena power to compel testimony and documents — though no committee has used it yet.
Next week, the Oversight panel is set to hold a hearing on the U.S.-Mexico border and a hearing with former Twitter employeesabout the platform’s suppression of the New York Post’s story on the Hunter Biden hard drive in 2020. -The Hill
Speaking of the Bidens, the Oversight panel is also conducting an ‘extensive probe’ into the business dealings of President Biden’s family which will focus on Hunter Biden.
Republicans on the House Oversight, Judiciary and Intelligence committees have also sought information related to President Biden’s mishandling of classified information, while the House Foreign Affairs and Armed Services committees are going to be investigating the botched withdrawal from Afghanistan.
And in what will hopefully take the spotlight – House Republicans have formed the Select Subcommittee on the Weaponization of the Federal Government under the House Judiciary Committee, in response to those who wanted a “Church-style” committee to investigate how the DOJ and intelligence agencies were used in a character-assassination plot against former President Trump and others.
