Snap Inc. User Growth, Financials Boom In Q4, But Q1 Guidance Gets Thumbs-Down

In this Monday, Aug. 7, 2017, photo, the Snap Inc. logo appears on a screen above a trading post on the floor of the New York Stock Exchange. Snap Inc. reports earnings, Thursday, Aug. 10, 2017. (AP Photo/Richard Drew) AP

Snap Inc. stock fell in after-hours trading after the Snapchat parent gave financial guidance for the first quarter of 2021 that disappointed Wall Street.

The share price decline of more than 6% came despite a stellar set of fourth-quarter results, including user growth, profit and revenue all above analysts’ consensus forecasts.

Like other social and digital companies, Snap has benefited significantly from the coronavirus pandemic, which has reduced options for entertainment and leisure. Daily active users rose 22% to 265 million, exceeding analysts’ expectations.

Revenue in the last quarter of 2020 hit $911.3 million, up from $560.9 million in the year-earlier period. The 62% rise in revenue was the steepest since the company’s IPO in 2017. Adjusted earnings per share hit 9 cents, triple the 2019 level. Analysts had called for revenue of $856.1 million and earnings of 7 cents a share.

Even though Snap stock gave ground, its closing price of $58.31 was more than triple its range just a year ago. On Wednesday, it established a new all-time high above $60 as investor sentiment remains largely positive. The dimming of enthusiasm was due to projections for a projected EBITDA loss of $50 million to $70 million, compared with analysts’ consensus expectation of a profit of $17.5 million.

The company has rebounded sharply from where it was two years ago, when its stock price was languishing in the mid-single-digits, users were fuming over a clumsily executed redesign and the management team was seeing major turnover.

One consistent part of Snap’s strategy has been connecting with content providers seeking to connect with its young user base.

In remarks posted to the company’s website, CEO Evan Spiegel highlihted growth of the company’s Discover platform. “Partners ranging from digital natives like, Barcroft, Team Whistle, and Group Nine to more established media companies like NBCUniversal, ESPN and ViacomCBS have each reached over 25 million viewers across their Discover channels in Q4,” he said. A record 97 new international channels joined the platform in the quarter. Ten new Snap Originals also launched, including the second season of Will Smith’s Will From Home, which the company said has reached 43 million total viewers in its two seasons.

While the core Snapchat users are teens and 20-somethings, show and publisher offerings are starting to expand the appeal to older audiences, Spiegel noted. Viewership among users 35 and older grew 25% compared with the same quarter in 2019.

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