SNAP Beat Expectations Yet Sees Stock Fall as Company Released Q4 Earnings

By Thomas Price Friday, February 5, 2021

With more people staying home and having far fewer entertainment options such as movie theaters, theme parks, and bars, social media apps have seen major spikes over the past year. This has certainly been the case for Snapchat, with its app user base growing tremendously. The company recently released its quarterly report highlighting many of the strong growth numbers Snap’s app has seen. Despite business going well, the stock market reacted incredibly poorly to the quarterly report news, with shares of SNAP dropping drastically following the release.

A dollar sign standing in front of a digital graph.

Snap, Inc. — Quarterly Report

Snap just posted quarterly results showing impressive numbers across the board. The company saw strong improvements both in revenue as well as in its user base. In fact, the company saw its daily average users reach 265 million, an increase of 22%, or 47 million from the same time period in 2019. This also beat analysts expectations by about 8 million. On top of that, Snap created content watched by 90% of the US Gen Z population. The business also launched 97 new international Discover channels, a new record. The average revenue per user reached $3.44, 10 cents above analyst expectations.

In terms of revenue, Snap also beat expectations as the company generated an impressive $911 million. The revenue in Q4 is a massive 62% increase compared to the same quarter in 2019, where the company only earned $560 million. The company once again beat analyst expectations by over $50 million, as the new app users and business generated strong returns. Snap also reported $0.09 of adjusted earnings per share, overperforming the forecast of only $0.07 of adjusted earnings per share.

Snap’s Stock Drop and Expectations for Q1

Despite the strong earnings report from the app company, Snap saw their stock price plummet as shares fell by over 7% in after-hours trading. The drop in share value comes nearly entirely from the lackluster guidance from the business regarding Q1. Many analysts were predicting the app company to finally report the business making a profit in this quarter, while Snap still expected to lose somewhere between $50 million and $70 million. The partial reasoning for this lies in the two-week-long interruption in advertising after businesses stopped paying for ads on the app during and after the siege on the US Capitol Building.

The second reason is the oncoming privacy changes from Apple’s newest iPhone update, iOS 14. The new privacy features will limit Snap’s ability to offer more targeted ads to businesses, thus creating a lower value in these businesses purchasing advertising on the app. The company is actively working with Apple in order to curb the effects that these new privacy features will have on businesses, though it is still unclear how this will change things. Snap has still had an incredibly strong 2020, and while the stock drop following Q1 forecasting is not ideal, the growth in app users and revenues will likely result in more good news from the company in 2021.

About the Author

Headshot for author Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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