Economy

Snapchat just did something insane. It beat expectations

Snapchat just did something insane. It beat expectations

Snap posted losses of $0.13 per share on $285.7 million in revenue versus expectations of a $0.16 per share loss on $252.95 million in revenue.

This is actually the first time that Snap beat Wall Street expectations, allowing the company to finish 2017 strong.

While Snap made significant gains in Q4 - the results impressed investors, sending the company's stock soaring to heights it hasn't seen in a while - it's still unclear whether the social app can become a true alternative to Facebook and Google as a digital advertising giant in the months and years to come.

However, several Wall Street analysts remained unconvinced that Snap can sustain its new-found momentum. The stock jumped as much as 31 per cent in extended trading.

Among Greenfield's concerns is an app redesign, still not available in Snap's biggest advertising markets, that separates content created by a user's friends from media content. It also aimed to entice more creators, like those on YouTube (and previously on Vine), to embrace the app as a platform. The highly anticipated redesign, teased to analysts at its third quarter earnings call, has been met with criticism from early users.

"Our business really came together towards the end of past year", chief executive officer Evan Spiegel said in a statement.

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Snap is still struggling massively to bring its revenue up to par with expenses.

The rollout of that update has progressed more slowly than Snap initially suggested, reaching only 40 million or a fifth of its total audience so far. Expenses were up 93% over the same period previous year. But Spiegel was issued a stock award that vested immediately at the time of the IPO, representing 3 percent of all outstanding shares and delivered in "equal quarterly installments over three years beginning in the third full calendar quarter following this offering". WFG Advisors LP now owns 7,377 shares of the company's stock valued at $131,000 after buying an additional 2,537 shares in the last quarter.

That now stands at 14.3% of outstanding shares sold short.

Analysts are waiting to see whether the positive steps are, in fact, trends.

Looking ahead to this year, Snap is predicted to generate $1.47bn in worldwide ad revenue - up considerably on the $825m achieved in 2017 - according to eMarketer estimates. The number of advertisers using the auction system doubled over the prior quarter. "This can be viewed positively to a degree, but only to a degree: Costs other than stock-based compensation amounted to 162% of revenue in the quarter and 200% of revenue for the year".

"We ended 2017 confident that we can grow our Snapchat community and monetise our products more efficiently than ever before", said Snap CEO Evan Spiegel in an earnings call. Investors had been concerned that Snapchat's user growth rate would continue to slow amid mounting competition from Facebook and its subsidiary, especially since Instagram's 2016 launch of its Snapchat-copying Stories feature. Anything else Snap thinks to do-like sell plush toys or video glasses-seems to be like rearranging deck chairs on the Titanic.


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