Snap Inc. Soars After Surprise Q4 Earnings

After years of neglect Snapchat wins in the developing world

Snapchat's owner Snap Inc. reported on Tuesday substantial growth in its users and revenue during its most recently-ended quarter, which revived hopes the social media app can survive the competition it has in the form of Instagram, owned by Facebook. Its net loss was about $350 million for the quarter ended December 31. The poor report included slowing user growth and a revenue miss, and showed no clear path to profitability.

While Snapchat has always been considered popular among younger users, the service must prove it can also appeal to users in older demographics in order to drive further growth and appease advertisers looking to reach users with more spending power.

Taking what CEO Evan Spiegel called a real "risk", Snap unveiled Snapchat's highly anticipated redesign during the fourth quarter.

"Our business really came together toward the end of past year", Snap CEO Evan Spiegel said on a conference call with analysts Tuesday, according to CNN. The company's stock had a trading volume of 232,240,000 shares, compared to its average volume of 16,480,000. If the gains hold, Snap's stock could top its IPO price of $17 a share for the first time since July.

Will Snap Have More Bad News When It Reports Earnings?

"We're still waiting to see what happens with Snapchat's app redesign that separates friend content from media content, since it hasn't rolled out to all users yet", said Debra Aho Williamson, principal analyst at eMarketer. He noted that the company's new ad products such as Promoted Stories and greater emphasis on paid installs, direct response ads and small- to medium-sized businesses were key drivers of the 72% increase in revenue.

To make its app more friendly to users and advertisers, Snap launched a redesigned app in November, splitting "friends" from content feeds. This exceeded the $252.9 million that was expected by analysts polled by Yahoo Finance, according to Forbes.

Snap reported a net loss of $350 million or $0.28 per share, up from analyst expectations of a $410 million loss.

In addition, quarterly revenue of $253 million would bring its full-year revenue to $793 million.

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Piper Jaffray analyst Sam Kemp said that the Q4 Snap earnings release shows that the company is indeed making progress, although he added that much of the beat was the result of dramatically lowered expectations.

Now those results don't scream financial juggernaut, but average revenue per user improved to $1.53 in the fourth quarter.

Wall Street is looking for revenue of $253 million, or a 52 percent jump over a year ago.

Still, Snap has a long way to go in its turnaround.

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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.

"We executed well on our 2017 plan to improve quality, performance, and automation, which removed friction from our advertising business and improved our application for the Snapchat community", he said.

Westpac Banking Corp boosted its position in Snap Inc (NYSE:SNAP) by 42.0% during the fourth quarter, according to its most recent disclosure with the Securities and Exchange Commission (SEC).

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