Snap Reports Earnings that Blow Wall Street Away but Shares Still Fall

Snap, the parent company of Snap Chat, reported its fourth quarter financial report this week revealing that sales had topped estimates and user growth had skyrocketed.

Earnings exceeded expectations with $911.3 million in net revenue as opposed to the $856 million that was expected.

So why did shares drop about 10%? The company missed on guidance.

Looking ahead, the company has forecast a first-quarter adjusted EBITDA loss, whereas a profit was expected. For the first quarter, Snap is expecting an adjusted EBITDA loss between $50 million and $70 million. Consensus analysts were looking for a profit of $17.5 million. Snap’s revenue forecast of between $720 million and $740 million for the first quarter however was ahead of the $705 million projection.

For the fourth quarter, Snap reported adjusted earnings per share of 9 cents compared to the 7 cents expected and 3 cents year-over-year.

Daily active users at 265 million was better than the 257.9 million that had been expected and the 218 million YOY. Snap’s average revenue per user grew even faster, or by 33% to $3.44.

For the quarter the company saw a revenue growth of 62%. This was the fastest pace for the company since it went public back in 2017.

CEO Evan Spiegel said on the earnings call, “From start to finish, 2020 reinforced the importance of that mission. During one of the most challenging years in recent history for our global community and their loved ones, our team worked hard to find ways to bring people closer together. We’ve enabled relationships to deepen and flourish, even as we are physically apart.”

He added, “We added 16 million daily active users this quarter for a total of 265 million up 22% year-over-year. This growth validates the broad appeal of our service and the role we play in the life of each member of the Snapchat community. Our quarterly revenue increased 62% year-over-year to $911 million, showing the trust advertisers have placed in us and our communities’ receptiveness to brands with shared values. We expect our relationships with community members and business partners to become even stronger as our platform continues to evolve.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.