Febrero 21, 2018

Snap stock soars on first ever better-than-expected earnings

08 Febrero 2018, 09:27 | Benedicto Grullon

Snap Inc. (NYSE:SNAP) Is Waking Up To “Time Well Spent” Movement Facebook Is Already Addressing- Microsoft

Will Snap Have More Bad News When It Reports Earnings?

For the first time since going public, social-media-turned-camera company Snap Inc (NYSE:SNAP) reported blowout quarterly numbers. Morgan Stanley raised their target price on shares of Snap from $10.00 to $11.00 and gave the company an "underweight" rating in a research report on Wednesday.

While Snapchat has always been considered popular among younger users, the service must prove it can also appeal to users in older demographics in order to drive further growth and appease advertisers looking to reach users with more spending power.

Looking at the companies' year-on-year performance, Snap saw a notably faster growth in North America, with a 17.7 percent increase in DAUs. Snapchat's design has also been revamped in a bid to make it more user-friendly and to appeal to older users. Of the blue-chip brands that did start putting money into Snapchat in 2017, 90% spent money every quarter, suggesting they were happy with the results. Revenue growth accelerated from 62% last quarter to 72% this quarter. "This can be viewed positively to a degree, but only to a degree: Costs other than stock-based compensation amounted to 162% of revenue in the quarter and 200% of revenue for the year".

Snapchat divides users into three categories -"North America", "Europe", and "Rest of World".

Advertising revenue rose 74 per cent to $281 million, as companies advertised more in the key holiday quarter. It also added 8.9 million users, beating expectations of 6 million. Furthermore, the company's average revenue per user or the ARPU was on the $1.53, up from the $1.36 estimates.

Since Snap's IPO in March 2017, investors have been watching closely to see if the company could fend of competition from Instagram, which integrated "stories" - a feature similar to Snapchat's ephemeral messaging service. But the Promoted Story format isn't the only ad unit that Snap plans to automate in hopes of replicating its Snap Ad success. In the last quarter, Snap lost $443 million, up from the $124 million it lost in Q3 2016. Then it showed off that redesign to the media later that month.

Snapchat has finally made investor concerns disappear.

Deutsche Bank analyst Lloyd Walmsley said in a note about the Q4 Snap earnings release that although he had picked up improving user trends before the release, the company also showed strength in advertising, which he called a "complete surprise".

"There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don't yet know how the behaviour of our community will change when they begin to use our updated application", Spiegel said. While it was critical to build our team to keep pace with the growth of our business, it's become clear that we can now unlock substantially more productivity simply by changing the way that we work and by continuing to build an inclusive and creative culture.

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