Snap skyrockets 50% after broadcasting its first-ever profitable quarter and recovering from Apple’s privacy modifications

  • Snap’s stock rose by 50% in normal trade on Friday after exceeding analysts’ expectations for the fourth quarter.
  • The company rebounded from Apple’s privacy adjustments quicker than projected in its first profitable quarter of the fiscal year 2018.
  • On Thursday, the strong earnings reports from Snap and Amazon buoyed tech markets, paving the way for a relief rally.

Snap’s parent company, Snapchat, saw its stock soar by 50% in regular trading Friday after reporting its first quarterly earnings and claiming that it had rescued from Apple’s privacy rules quicker than anticipated.

The instant-messaging app provider announced fourth-quarter results that outperformed analyst expectations by a wide margin on Thursday.

 Despite generating $1.3 billion in revenue, earnings per share came in at 22 cents, exceeding the average analyst expectation of 10 cents on revenue of $1.2 billion. 

The number of daily active users increased by 20% year on year to 319 million, exceeding expectations of 316.5 million.

Earlier this week, Meta announced a disappointing quarter. It missed estimates and saw the number of daily users fall for the first time in its history, prompting its stock to plummet as much as 26 percent.

Apple’s iOS updates, according to Facebook’s parent company, had a significant impact on the company’s advertising business last year. 

In April, Apple introduced changes to its operating system that allow users to opt-out of being tracked by brands, a move that can undermine the business models of ad-supported platforms such as Facebook and Google.

Snap CFO Derek Anderson, on the other hand, stated that because the company has purposefully built privacy by design into its products, the iOS restrictions are “likely to be experienced differently for our business than perhaps for other businesses.”

As of the end of the fourth quarter, a large portion of Snap’s advertisers had switched over to using new admeasurements. He also stated that some parts of the company’s business had recovered more quickly than anticipated.

Despite this, Snap anticipates that its new measurement solutions will “take at least a couple more quarters for our advertising partners to gain full confidence in our new measurement solutions.”

Snap continues 13M daily active users in Q4. 

According to Susannah Streeter, a market analyst at Hargreaves Lansdown, what may have worked better for Snap, as opposed to Meta, is that the company has star attraction for youthful social media users, as opposed to the company. 

Not only did it increase daily active users by 13 million, but it also made a profit for the first time, according to her.

“JUST like in any other social arena, young people don’t always want to be seen hanging out with their parents, which is why the allure of apps like Snap and TikTok over social media platforms like Facebook and Instagram is so strong,” she explained.

Snap’s stock had risen by more than 60% during Friday’s pre-market session. “The 60 percent increase in the share cost in after-hours trading recalls the positiveness that this will not be a one-off result, but rather the beginning of sustained improvement in user development and profits,” she continued.

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Snap expects revenue in the first quarter to be between $1.03 billion to $1.08 billion, higher than the $1.02 billion predicted by analysts surveyed by Refinitiv in the previous quarter.

In the first quarter, it is projected that daily active users would total between 328 million and 330 million, which is higher than the average forecast of 327.8 million people.

Snap’s shares had dropped 23.6 percent on Thursday before the company reported its earnings, after Meta’s disappointing results, which also shook other social media companies. However, once the company presented its quarterly report, it saw a spike of up to 62 percent in after-hours trading.

The strong earnings report from Amazon, released after the market closed on Thursday, buoyed tech stocks and laid the ground for a relief rally after an eventful week.

Snap was up 46.5 percent at $35.94 a share as of 9:48 a.m. ET on Friday, according to the most recent available data.

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