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Why You Shouldn't Expect Snap to Give Any Guidance When it Reports Earnings Today

When Snap (SNAP) reports its first earnings as a public company after Wednesday's closing bell, what's left out of the fiscal first-quarter results could be just as important as what's included.

Snap won't be giving earnings guidance for the quarters ahead, which could rattle analysts and investors, as they often use such projections to build models and analysis predicting future financial performance. The Snapchat parent company said in its IPO prospectus in February that it doesn't plan to give quarterly or annual financial guidance.

TheStreet will be hosting a live blog analyzing Snapchat's earnings report after the close on Tuesday. Please check our home page for more details.

The practice of giving guidance has been widely debated among market experts. Those who are critical of it say it provides a free service to investors who should be doing their own analysis. Others, however, believe there are clear benefits for both the company and financial markets, such as reduced stock price volatility, higher valuations and improved transparency between company executives and investors.

Critics, including billionaire investor Warren Buffett and JPMorgan Chase CEO Jamie Dimon, have said earnings guidance encourages "malpractice" among companies trying too hard to meet it, and also wastes managers' time. Giving guidance can also ramp up investors' focus on short-term results, rather than on the big picture, according to a 2006 report from McKinsey and Company, which surveyed 4,000...


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