Reports Q4 2020 results on Thursday, February 4, after the close
Revenue Expectation: $ 849 million
EPS expectation: $ 0.0687
Snap Inc & # 39; s (NYSE 🙂 more than 200% increase in the last 12 months shows a tremendous rebound for this social media platform manager as he struggled to survive until 2018. When the company announces its fourth quarter earnings today, investors will be keen to see if the company can sustain a drastic improvement in its user engagement and sales.
California-based Snap, which operates the popular Snapchat mobile app for sending photos and videos that are quickly disappearing, is one of the main beneficiaries of the pandemic as more and more people grow interact digitally. That trend has forced advertisers to spend their money on social media apps. Snap saw revenue up 52% ??in that quarter, with 249 million daily active users.
Judging from the recent performance of social media giants such as Facebook (NASDAQ 🙂 and Alphabet's Google (NASDAQ :), there is a good chance that Snap will report another strong quarter.
Google's parent company on Tuesday said heavy spending on digital ads during the Christmas shopping quarter boosted sales, with YouTube sales up 46%. Previously, Facebook sales were up 33% in the holiday quarter, with online shopping during the pandemic fueling the demand for digital ads on its social networks. Snapchat competes with FB's Instagram, especially for young users.
Snap told investors in October that fourth-quarter revenues could increase 47% to 50% from the same period a year earlier if positive ad trends continue. Investors have shown great confidence in Snap's turnaround, which has pushed their shares up 200% over the past year. They closed at $ 59.20 on Wednesday.
Further Upside Potential
In a recent note, MoffettNathanson analysts said the Snap results will surprise positively due to very supportive macroeconomic conditions that are boosting valuations for high-growth stocks:
"There is further upside for Snap to take advantage of e-commerce and [small- and medium-sized business] marketer tailwind in the wider online ad industry."
"With a cyclical rebound in ad spend expected in 2021, we estimate that Snap's revenues will grow 54% next year and grow 30% annually through 2024."
In addition, analysts have been impressed by Snap's ability to generate strong top results while spending continues to grow "at a relatively modest 20% rate."
Snap's improved financial and user statistics undoubtedly played a big part in the stock's outperformance last year, but the regulatory oversight facing the major social media companies is another big positive for Snap.
An app with a clear and defined audience and with little room for abuse is in a much better position to withstand potential regulatory changes worldwide than giants like Alphabet's Facebook and Google – the social media heavyweights some politicians want to break.
Bottom Line
Snap is in an excellent position to capitalize on the increasing use of social media apps for both communication and entertainment during the pandemic. That shift should continue to help drive more users and higher sales in the future.
