Snap Inc. (NYSE:SNAP) shares edged up 0.7% to close at $4.56 on Monday, recovering slightly from a 3.2% decline the prior week. Trading volume reached 36.1 million shares, 21% below the 65-day average.
The modest gain comes as a new regulatory challenge emerges in France, where legislators have advanced a proposal to prohibit social media use for anyone under the age of 15. The bill, which is set for debate in the lower house on Tuesday, could have significant implications for Snap's European operations.
Europe has been a crucial driver of Snap's recent revenue growth. In the first quarter, the region contributed approximately $99.8 million of the company's $165.6 million revenue increase, representing about 60% of the total growth. This is particularly notable given that Europe accounts for only 21% of Snap's overall quarterly revenue.
The region's growth has been fueled by higher average revenue per user (ARPU), which jumped 48% to $3.34, even as daily active users in Europe declined 2% to 97 million. Revenue in Europe climbed 45% to $323.9 million. By contrast, North America, which generates 56% of Snap's revenue, contributed just $19.6 million in year-over-year growth, five times less than Europe's contribution.
France's proposed legislation would require online platforms to implement age verification methods approved by the country's privacy watchdog. President Emmanuel Macron has expressed a goal of enforcing the ban by early September. The bill must still pass through the Senate after Tuesday's lower house vote.
Snap's stock still ended Monday below the $4.68 level seen on July 10, and the 3.2% decline from the previous week was not fully recovered. UBS analyst Stephen Ju lowered his price target from $7 to $5 last Monday, maintaining a Neutral rating. He noted a recovery in performance-ad spending in June after softer results in April and May. The updated target implies only about 10% upside from Monday's close, suggesting limited room to absorb additional compliance costs.
Snap's first-quarter results showed operational improvement. CEO Evan Spiegel stated, "In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow." Revenue grew 12% to $1.53 billion, and free cash flow totaled $286 million. The company's annual meeting is scheduled for July 30, with second-quarter earnings expected on August 3 at 5 p.m. EDT.
For the current quarter, Snap's initial outlook projects revenue between $1.52 billion and $1.55 billion, with adjusted EBITDA ranging from $175 million to $200 million. Restructuring charges are anticipated between $95 million and $130 million. Risks include broader age restrictions, sluggish advertising demand, and rising compliance expenses. The financial impact of the French proposal remains uncertain, as Snap does not disclose revenue or user figures for France separately.
