Snap’s Ads, Users And Earnings Up; Revenue And Stock Down

Despite showing strength in several measures — revenue and Q1 forecasts beat pre-release estimates, Snap showed notable growth in its active user base, Discover video content platform and advertising revenue and relationships — Snap Inc. missed investor expectations for revenue and its stock price suffered.

Mightly.

Post-release, Snap saw its stock price fall as much as 14 percent in after-hours trading Tuesday (Feb. 4), after reporting revenue of $561 million, a 44 percent pick up from the same time last year. Unfortunately, not quite enough of a pick-up, as analysts were forecasting  $563 million. The average revenue per user also came in below pre-release estimates, clocking in at $2.58 as opposed to the $2.62 expected.

Despite those two notable misses, Snap also showed a few unexpected signs of strength with its Q4 results hit the wires. Earnings per share came in ahead of forecast at 3 cents instead of the 1 cent predicted. Daily active users also bumped up more than analysts were expecting — to 218 million as opposed to the 214 forecast.

Snap, in its post-earnings release, attributed that bigger-than-expected growth to its recent addition of a variety of augmented reality features and users’ frequent engagement with them. Over 75 percent of the platform’s users engage with the AR features at least once a day. Snap also reported that on New Year’s Eve, more than 200 million people engaged with augmented reality on Snapchat over 13 billion times, up from 9 billion last year.

Also, drawing in and retaining users is Snap’s content discovery platform, Discover, which saw an impressive 35 percent bump in users watching content in 2019, and a 60 percent increase in daily time spent on the site by users over the age of 25. In Q4 alone, Snap reported, 50 Shows reached a monthly audience of over 10 million viewers.

Snap also touted advances to its advertising platform over the last year, including the debut of Instant Create that allows advertisers to smoothly create ad campaigns for Snapchat and  Snap Select and then embed their ads into shows on Discover. Snap reported that revenue from commercials more than tripled year-over-year in Q4 2019 and that Story Ads doubled year-over-year in Q4 2019 — though it did not attach more specific numbers to the starting or ending points.

“In 2019 we saw momentum across the board. We grew our community by 31 million daily active users, accelerated our revenue growth, and progressed towards profitability by improving full-year Adjusted EBITDA by 65 percent year-over-year,” said CEO Evan Spiegel in a statement. “The strength in our core business gives us confidence in our long term growth and profitability and we’re excited to build on these results in 2020 and beyond.”

But in 2020 and beyond will also contain challenges for Snap as it is squeezed on one side by the internet ranking 8,000-pound social media gorilla Facebook and on the other by global up-and-comer TikTok.  For the last year, Snap has managed to thread that needle, with a stock price that grew by 173 percent over the course of the year.

And despite the hiccup and the haircut its stock price took Tuesday — Snap is predicting a solid first quarter of the new year. The firm is calling $450 million and $470 million in revenue, ahead of analysts’ expectations of $462 million for the period.