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

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

The stock of Snap (SNAP) catapulted and gained almost 50% on Wednesday as the Snapchat-operator received several price target increases following a fourth-quarter earnings report that smashed revenue estimates and also beat on the bottom line.

Daily active users: 187 million, up 5% from Q3.

Taking what CEO Evan Spiegel called a real "risk", Snap unveiled Snapchat's highly anticipated redesign during the fourth quarter. Monetization also posted a significant jump on a sequential basis, with global average revenue per user (ARPU) rising from $1.17 in the third quarter to $1.53 in the fourth quarter.

Snap is undergoing a company transition, which includes overhauling its Snapchat app, in the midst of intense competition from Facebook (FB) and its Instagram platform.

"Our business really came together toward the end of previous year", said Spiegel on Tuesday, according to CNN.

Those changes have included rethinking past habits, by making greater efforts to appeal to older users and to users of Android phones, who often reside in overseas markets.

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Investors will be glad to hear that more than 90pc of Snap Ads were purchased programatically, meaning the damage caused by the move to an auction-based system that initially hurt ad prices seems to have reduced.

In a letter to investors issued today, Spiegel lays out the case for Snap's eagerness and efficiency at responding to growing competition from Facebook and slowing growth internally. It added 8.9 million daily active users in the final three months of the year, more than any other quarter of the year. In the prior quarter, it managed to do this by 49 per cent to $255 million. Even with the spike from the earnings, shares are about $17, which was the initial offering price last March. It was Snap's fourth quarterly earnings as a public company.

Snap posted a loss of US$350mln, or 28 cents a share, compared to a loss of US$170mln, or 20 cents a share, a year earlier. In fact, ad spend through 4C increased 29% in Q4 to close out the first full year of self-serve Snap Ads. In Q4, our effective price per impression decreased by 25%, while our total advertising revenue grew 38% sequentially.

To make its app more friendly to users and advertisers, Snap launched a redesigned app in November, splitting "friends" from content feeds.

Snapchat, which was originally designed as, and found success in being, the answer to the uber-connectedness and constant validation of already-established social media platforms like Facebook, Twitter, and Instagram, was beginning to see its star fade a bit as those aforementioned platforms incorporated (copied, you might say?) the things that made Snapchat so unique.

"These are big improvements that show how quickly Snap can scale when our products and our ad business are working well together", Spiegel added. Annual ad revenue climbed 74% year-over-year, said Imran Khan, Snap's chief strategy officer. Year-to-date, SNAP has declined -3.76%, versus a 0.85% rise in the benchmark S&P 500 index during the same period.

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