Thursday, 15 November, 2018

Snap beat expectations and sent its stock price skyrocketing-still minus profit

Snapchat Snap beat expectations and sent its stock price skyrocketing-still minus profit
Sherri Watson | 07 February, 2018, 01:02

Tuesday Snap, Inc. closed at $14.06 a share, then rallied 22% in after hours trading.

The number of daily active users of the Snapchat application rose to 187 million, a gain of 8.9 million in the quarter and up 18 per cent from a year earlier. Revenue was $285.7 million, up 72 percent year-over-year, with earnings per share of -$0.13 adjusted compared to estimates of $253 million and a -$0.16 adjusted. Wall Street expected Snap to add about 6 million daily users during the quarter.

Snapchat has finally made investor concerns disappear. The highly anticipated redesign, teased to analysts at its third quarter earnings call, has been met with criticism from early users.

"Our work during 2017 is proof that we aren't afraid to make big changes for the long-term success of our business", Snap Inc. Barclays raised shares of Snap from an "equal weight" rating to an "overweight" rating and lifted their target price for the stock from $11.00 to $18.00 in a research report on Tuesday, December 5th.

The positive news about Snap's revenue was well received by Wall Street, however. That would also put Snap's yearly sales at $793 million, nearly double the $404 million it brought in in 2016.

Among other features, the redesign promised to have a clearer delineation between content from friends and content from publishers.

Another feather in Snap's cap: Average Revenue Per User, which came in well above the $1.36 ARPU analysts expected.

Snap CEO Evan Spiegel also wrote in prepared remarks that the company sold 90 percent of its advertising in Q4 via automated sales software, known as programmatic buying. Bank of America cut their price objective on shares of Snap from $17.00 to $16.00 and set a "neutral" rating for the company in a research report on Wednesday, November 8th. BTC Capital Management Inc.'s holdings in Snap were worth $1,945,000 at the end of the most recent reporting period.

Snap said the average revenue per user rose 46 per cent from a year ago to US$1.53, offering some hope for reaching profitability.