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Snap’s stock price surges with surprising Q4 earnings

by Justin Herrick | February 7, 2018February 7, 2018 9:30 am PST

Snap’s turnaround could be happening sooner than anyone expected. The company behind Snapchat announced financial results for Q4 2017, and its performance beat expectations to send the stock price surging. Investors appeared to be impressed by growth in daily active users and revenue; however, costs remain high for Snap as profitability still hasn’t been achieved. The matter of profitability aside, it was exactly the type of quarter Snap needed to silence skeptics for a bit.

Revenue year-over-year improved for both the quarter and the year. In the final months of 2017, Snap managed to generate $286 million but took a loss of $350 million. Despite the expensive loss, that’s a 72 percent improvement compared to Q4 2016. A 104 percent increase in annual revenue, meanwhile, meant Snap generated $825 million in 2017.

The loss for all of 2017 came in at $3.4 billion, a number that doesn’t come as a surprise to anyone.

Its gains are what Snap and investors should like. The number of daily active users jumped to 187 million, courtesy of 8.9 million users joining as the year came to an end. Snap says that’s the highest net additions in more than four quarters.

Advertisers leveraged Snapchat’s appeal to younger demographics during the final quarter when the holidays increase consumer spending. That helped Snap raise its average revenue per user to $1.53, which doesn’t seem like a lot until you consider how many users are on Snapchat. And it’s the growth in daily active users paired with timing that allowed Snap to generate more revenue compared to previous quarters going back to 2016.

Snap’s Spectacles didn’t get mentioned during the conference call with investors and the media. Many assume that’s because the smart glasses have been quietly killed off after hundreds of thousands of units went unsold and piled up in warehouses.

Co-founder and chief executive officer Evan Spiegel also confirmed the overhauled Snapchat app will be available to all users by the end of March.

Upon announcing the Q4 2017 earnings, Snap’s stock price soared above $17 in after-hours trading for the first time since July of last year. The momentum continued on Wednesday morning with the stock price approaching $20. Now the big question will be if Snap can maintain interest from advertisers with its user base growing again.

Snap

Justin Herrick

Justin is easily attracted to power buttons. His interest in technology started as a child in the 1990s with the original PlayStation, and two...

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