It's a busy week for earnings, with trillion-dollar social media giant Meta Platforms among the biggest names to report. But before Meta releases results late Wednesday, investors will be watching for results late Tuesday from two of its smaller social media stock rivals: Snapchat parent Snap and Reddit.
Both companies compete for digital advertising dollars against giants Meta and Alphabet, Google's parent company. Reddit stock has surged higher since its market debut more than six months ago. Snap, however, has struggled with inconsistent performance.
Here's what to expect from the two social media players:
Reddit Stock: Q3 Expectations By The Numbers
Reddit will report third-quarter earnings after the market close Tuesday. Shares have gained 140% from their IPO price of 34 and 62% from their first-day closing price.
San Francisco-based Reddit's user-forum website boasts more than 340 million weekly active users, who post across more than 100,000 Reddit communities. The 19-year-old firm completed an initial public offering in March. Since then, the stock has been helped by strong user growth and bullishness about the company's ability to license its data to AI developers.
For its third-quarter report, analysts polled by FactSet expect Reddit to post a loss of 7 cents per share on sales of $314 million. That would represent year-over-year sales growth of 51.3%.
Reddit has stated its goal is to soon reach profitability on the basis of generally accepted accounting principles, or GAAP. Helped by a 54% jump in revenue, Reddit narrowed its net loss to $10.1 million in the second quarter, compared with $41.1 million a year earlier. Chief Financial Officer Drew Vollero told the Wall Street Journal in September that Reddit's "financials are inflecting and becoming very profitable, very quickly."
But analysts see GAAP profits arriving with Reddit's fourth-quarter results, with this upcoming report still showing a loss of $8 million.
Morgan Stanley analysts wrote in a recent client note that for Reddit they "see upside to near term street revenue estimates on the back of solid advertising checks." Reddit is offering lower pricing and has seen less advertising churn, according to the note.
Morgan Stanley rates Reddit a neutral equal weight overall. The analysts' note said investors will be listening for updates on Reddit user growth, as well as on deals to license Reddit content to train AI algorithms.
Snap Stock: 'Low Expectations' For Q3
Snapchat parent Snap will report results at the same time as Reddit. The Santa Monica, Calif.-based company's Snapchat chat and photo app has more than 850 million monthly users.
Snap has had a mixed year overall. Shares jumped up near a two-year high following a strong first-quarter earnings report in late April. But weaker results in the second quarter sent Snap stock tumbling in August.
Overall, Snap stock is down 36% year to date, compared with a 22% gain for the S&P 500. The stock's 12-month performance is stronger, with a 16% gain. But that still is weaker growth than the S&P 500. Plus, Snap is still trading at nowhere near the highs above 80 it reached late in 2021.
For its third-quarter report, analysts polled by FactSet expect Snap to post adjusted earnings of 5 cents per share on sales of $1.36 billion. That would represent year-over-year sales growth of 14%.
The company has been working to drive more direct-response advertising sales. Direct-response ads are designed to drive a response from a user, such as clicking directly into a product page for an e-commerce business. The company is also looking to add users for its $3.99-per-month Snapchat+ subscription offerings, which offers exclusive app features.
Jefferies analyst James Heaney rates Snap stock a buy but wrote in a recent client note that "expectations are certainly low" after the company missed revenue expectations for its second-quarter results.
"Investors need to see revenue growth at the high end of the 12%-16% year-over-year guide and Q4 revenue guidance of mid-teens year-over-year growth for the stock to go higher," Heaney wrote.
Snap Stock Vs. Reddit Stock
Meta stock remains the highest rated in the 75-stock Internet Content industry group tracked by IBD. Meta has a 97 out of a best-possible 99 Composite Rating, according to the IBD Stock Checkup tool.
Reddit, however, ranks sixth with a Composite Rating of 86 out of 99. Shares broke out earlier this month for a cup-with-handle buy point of 69.11, helping power a Relative Strength Rating of 95 out of a best-possible 99.
Snap is 18th in the group with a Composite Rating of 48 out 99.
Fellow social media operator Pinterest ranks 12th in the group, with a Composite Rating of 74. Pinterest will report earnings on Nov. 7.
