Snapchat Soars as Parent Beats Financial Expectations

Audrey Hill
February 9, 2018

Oppenheimer analyst Jason Helstein is at the opposite end of the spectrum on Snap stock with an Outperform rating, and he raised his price target from $14 to $19 per share after the earnings release.

Shares of Snap (NYSE: SNAP) have skyrocketed today, up by 40% as of 12 p.m. EST, after the company reported strong fourth-quarter earnings.

The Venice, California-based company posted a net loss of $350 million, or 28 cents per share, compared to a loss of $170 million, or 20 cents per share, a year earlier.

Snap Inc, formerly Snapchat, Inc, is a camera company.

However, several Wall Street analysts remained unconvinced that Snap can sustain its new-found momentum.

Shares traded at $17.73 after the bell, up 26 per cent after trading even higher earlier. It also aimed to entice more creators, like those on YouTube (and previously on Vine), to embrace the app as a platform. Initial responses from the users with the redesign have been far from positive.

Chief Executive Evan Spiegel said the company benefited from a transition of its ad business to an auction model and from improvements to the version of Snapchat that runs on Android phones, among other changes. The number of advertisers using the auction system doubled over the prior quarter.

Losses of $3.45bn compared to a $514m loss previous year. "They are going to continue to be competitors, and Snap is doing a creditable job of competing for revenue", analyst Michael Pachter of Wedbush Securities said.

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Advertising revenue rose 74 per cent to $281 million, as companies advertised more in the key holiday quarter.

Snap has been constantly tweaking its service, redesigning and adding new features, aiming to improve the overall experience for existing users and make it more appealing to new customers. Recently, Snap has backed endeavors to dial up its sales presence in new countries across the globe, and Wieser sees this trend as a reflection of these efforts.

Snap said in its IPO prospectus that restricted stock units include performance incentives and time-based incentives, with most of the latter vesting over four years. Snapchat's user growth, falling in recent quarters, showed a slight uptick this quarter.

Snapchat added nine million DAUs in Q4, bringing its total to 187 million - an 18 per cent year-on-year increase.

Snapchat had been struggling for the most part since the company went public past year, but the Q4 results allowed shares to bounce back after the platform expressed its confidence in beating its rival Instagram.

Internet companies commonly use stock awards as a way to lure developers in a highly competitive market, where cash-rich companies like Google and Facebook can pay much higher salaries.

In terms of financial results, Snap reported better-than-expected quarterly revenue. On this basis, Facebook saw a significantly slower growth of just 2.2 percent. Anything Snapchat does, Facebook copies almost instantly.

Other reports by MaliBehiribAe

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