02:26 PM EDT, 08/02/2024 (MT Newswires) -- Snap's (SNAP) subscription growth continues to be strong, though the social media platform's sensitivity to the macroeconomic environment remains "too unpredictable," RBC Capital Markets said Friday.

Late Thursday, the parent of social-media app Snapchat reported second-quarter adjusted earnings of $0.02 a share, swinging from a $0.02 loss a year earlier and in line with the Capital IQ-polled consensus. Revenue jumped 16% to $1.24 billion, but missed Wall Street's $1.25 billion estimate. Daily active users rose 9% to 432 million, while the Snapchat+ service reached 11 million subscribers.

Other revenue jumped 151% year over year to $105 million, Chief Financial Officer Derek Andersen said on an earnings conference call late Thursday, according to a Capital IQ transcript. Other revenue includes all non-advertising revenue, the majority of which is Snapchat+ subscription revenue, he added.

"The company's (direct response) business continues growing nicely, (small- and medium-size businesses) growth and (conversions API) adoption are accelerating and subscription adoption growth remains robust, which is adding significant high margin revenue," RBC analysts Brad Erickson and Logan Reich said in a Friday note to clients.

Brand-oriented advertising revenue fell 1% from a year earlier amid "particularly weak demand" from certain consumer discretionary verticals, as well as the timing impact of holidays shifting out of the second quarter, Andersen told analysts.

The company's shares were plunging 25% in Friday afternoon trade and have fallen 43% year-to-date.

RBC blamed the decline in brand spending to macro uncertainty and the possibility of a few larger advertisers stepping back. "Brand spend came up short of expectations after a (one-quarter) rebound and as a result, the margin flow-through bulls were looking for into (the third quarter) did not materialize," the analysts said.

The company's second-quarter revenue missed estimates across all geographies, outside of Europe, which exceeded expectations by 7.1%, according to the RBC note. Snap's ads business, excluding Snapchat+, "undergrew" peers, including Facebook parent Meta Platforms ( META ) , Pinterest ( PINS ) and Alphabet's (GOOG, GOOGL) Google ( GOOG ) and YouTube ( GOOG ), the analysts wrote.

For the ongoing three-month period, Snap expects revenue of $1.34 billion to $1.38 billion. The Street is looking for $1.36 billion.

RBC maintained its sector perform rating on the company's stock, with a $16 price target. "We do think Snap is making progress with its platform improvements as evidenced by the solid (direct response) growth," the RBC analysts said. "However, the company's sensitivity to macro remains too unpredictable to get more constructive with our rating."

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