Snap (Neutral, $25 PO) Stock view: Long-term potential, but near-term could be lumpy Snap will report its first earnings as a public company and expectations have a wide range. The 2H16 DAU slowdown has raised concerns in terms of both competitive risk and execution, so user trends could be the most important metric in the quarter. At this point, it’s difficult to gauge relative impact of Facebook / Instagram competition, Android technical issues, product cycle lumpiness, and seasonality to the recent slowdown. Nonetheless, our sense is that DAU expectations are around 164-166mn, and we'd expect variability (higher or lower) to have a meaningful impact on stock sentiment. In terms of the P&L, we expect a slight q/q decline in revenue per normal seasonality and are modeling down 1% q/q (consistent with comments in the prospectus filing}. While we can appreciate the momentum of the API roll-out with several new partnerships announced in January, our checks suggest most programs are early stage with limited volume to date. Considering the rest of the P&L, we expect a fairly messy quarter between deal costs, the CEO stock award, and a catch-up RSU stock comp expense. As we do not anticipate non-GAAP profitability until 2H19, we expect traditional P&L metrics will be less of a focus in the coming quarters. We recently initiated coverage with a Neutral and $25 price target (please see User overhang unlikely to be resolved in a Snap — Initiate at Neutral with $25 PO). Social media sector history suggests a wide range of possible outcomes for Snap and, as such, near-term lumpiness in metrics could result in high volatility for the stock. We also note that lock-up overhang could drag on near-term performance into the first lock-up expiration on 7/29. Key theme/metric(s) for 1Q: DAUs, ARPU, and competition We believe the key metric for the quarter will be the DAU number, which we model at 166mn (up 8mn q/q, 36% y/y). We believe DAU headwinds may peak 1H17 a