Snap Stock Soars on Positive Financials

Ryan Troup February 10, 2022Last Updated: March 24, 2022

1 2 minutes read

Shares of SNAP Stock Jumped Nearly 60% on News the Company Report its First Profitable Quarter

The social media sector took a significant hit when Meta (NASDAQ: FB), née Facebook, reported the first quarterly decline in active users in their history, which the company blamed on competition from other social media companies, namely TikTok. The market did not like this news, and Meta’s market cap took a $230 billion haircut, the largest single-day loss of capital in history.

Investors were so spooked that they also sold other social media companies, including Snap (NASDAQ: SNAP), which lost 23.6% and reported its financial results after the market closed on that same day. Investors were expecting a negative earnings release after Facebook’s report. They couldn’t have been more wrong.

Profits At Last

Snap’s earnings surprised the market in a big way. For the first time in its history, the company reported positive net income of $22 million or $0.01 per share. Snap also posted revenue of $1.3 billion, up 42.7% year over year.

Investors were pleased to hear that, unlike Facebook, Snap’s daily active users continued to grow throughout the year, including 20% growth year over year to a total of 319 million. The company also increased revenue per user from $3.49 to $4.06 compared to the previous quarter.

One of the reasons why Snap has continued to grow while Facebook plateaus is that Snap is rapidly becoming more than a peer-to-peer social media company. The company explained on its earnings call that friend story posting, and viewing numbers are down from pre-pandemic numbers, but hosted content like Discover and Spotlight are up.

The company is also seeing explosive growth from its augmented reality (AR) platform, which 250,000 developers are currently using to create everything from artwork to digital clothes modelling. This AR platform sets Snap apart from other social media companies, as it has the potential to become one of the primary forms of advertising shortly.

The investing world was so pleased by Snap’s results that it shot up 58% in the first trading session after their earnings were released. Since then, a small part of the gains have been given back, but the stock is still up over 17% from where it was before Meta’s poorly-received release.

Snap last traded at $41.02, down -11.96% YTD.

Learn more about Snap: Website | Investor Deck | SNAP Chart