Snap Inc. stock skyrockets after active user growth, strong earnings report

Yolanda Curtis
February 9, 2018

Snap seems to have reversed the pattern of falling user growth seen in previous quarters, with 187m active users on Snapchat reported in Q4 - 18pc higher than the same period for past year.

Snap reported a net loss of $350 million or $0.28 per share, up from analyst expectations of a $410 million loss. Wall Street, however, is looking for the company to report revenue of $253 million, up 52% from Q4 2016.

Snap's sales for the year as a whole doubled to $825 million, impressive growth by the standards of most public companies. It had a net loss of $3.5 billion previous year.

But even with Snap's 18% growth rate in daily users, a slight acceleration over the third quarter's 17%, it doesn't outpace larger rival Facebook, which logged 14% daily active user growth on a base that is many times Snap's size.

Snapchat's daily active users rose to 187 million in the quarter that ended December 31 from 178 million in the third quarter, beating analysts' average expectation of 184.2 million users, according to financial data and analytics firm FactSet. The additions come after Instagram released its anticipated "Type Mode", which gave users new fonts to play with.

Wall Street was disappointed in the meagre amount of new users that Q3 of 2017 brought, but this has significantly turned around for the final quarter of the year. Those bets appear to be paying off.

Snap is now locked in a fight for its life with Facebook, which copied its marquee Stories feature - and the accompanying selfie filters and masks - and inserted them into all of its major products: Facebook, Instagram, WhatsApp and Messenger.

"While it was critical to build our team to keep pace with the growth of our business, it has 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", Spiegel said. Investors were pleased with the outcome and Snap stock leapt more than 22pc after the bell. Nelson Roberts Investment Advisors LLC boosted its stake in shares of Snap by 10,033.0% during the 3rd quarter.

Taking what CEO Evan Spiegel called a real "risk", Snap unveiled Snapchat's highly anticipated redesign during the fourth quarter. While that's a significant jump from last year's $404 million, it's still a far cry from the $1 billion in annual revenue that some analysts were predicting when the company was hyping its IPO last March. "That's really where things are heading", said Snap CFO Drew Vollero during the company's earnings call on Tuesday. RBC Capital Markets analysts were most bullish with a price target of $21. "And because users who signed up for Snapchat before June 2013 were not asked to supply their date of birth, we exclude those users and estimate their ages based on a sample of the self-reported ages we do have".

Those design changes have put a bigger emphasis on user-to-user sharing, as opposed to content created by publishers and brands.

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