Friday, 25 May, 2018

Snapback for Snap on upside revenue surprise

Getty Images Will Snap Have More Bad News When It Reports Earnings?
Cristina Norman | 07 February, 2018, 01:53

Investors were impressed. The company's shares, which have almost halved in the past year, rose more than 20 percent in after-hours trading to $16.95. But according to its fourth quarter earnings report, the company has finally managed to add new daily active users (DAU) at a record high rate of 5 percent, which represents "the highest net adds since Q3 2016".

Snap made $285.7 million in revenue in the fourth quarter of 2017, beating analyst estimates of $253 million.

Snap brought in almost $286 million in revenue during the fourth quarter of 2017, up 72 from the same period the previous year.

The positive earnings report is a bright spot amid a year of tough moments for Snap, which has spent much of its time on the public markets trading below its IPO price.

Chief executive Evan Spiegel said Snap had executed its 2017 plan to improve quality, performance and automation well. But the company's bet on Spectacles has been expensive, costing the company $40 million last quarter for "excess inventory".

The company also showed signs of accelerated user growth. Vanguard Group Inc. now owns 8,353,729 shares of the company's stock worth $148,446,000 after acquiring an additional 1,601,170 shares in the last quarter.

In Facebook's earnings call last week, Facebook CEO Mark Zuckerberg called WhatsApp and Instagram the two most-used Stories products in the world, and said, "Stories are on track to overtake posts in feed as the most common way that people share across all social apps".

The biggest issue for Snap is its competition with Facebook's Instagram, says eMarketer analyst Debra Aho Williamson.

That re-design, separating friends from brands, was launched in late November, but has yet to roll out to all users.

If you want to know how a company like Snap can lose nearly $3.5 billion in a year, look no further than stock rewards to engineers.

"Snap benefited from some of the seasonality that's expected during the holidays as advertisers heavy up but also saw some new brands come in and test the platform", Goldman says. (One year earlier, it had added 10 million in the same quarter.) Wall Street expects Snapchat added six million new users in Q4.

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