Snap (NYSE:SNAP) Reports Bullish Q4, Stock Jumps 33.5%

Radek Strnad /
2022/02/03 4:17 pm EST
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Social network Snapchat (NYSE: SNAP) reported Q4 FY2021 results topping analyst expectations, with revenue up 42.4% year on year to $1.29 billion. On top of that, guidance for next quarter's revenue was surprisingly good, being $1.05 billion at the midpoint, 3.73% above what analysts were expecting. Snap made a GAAP profit of $22.5 million, improving on its loss of $113 million, in the same quarter last year.

Is now the time to buy Snap? Access our full analysis of the earnings results here, it's free.

Snap (SNAP) Q4 FY2021 Highlights:

  • Revenue: $1.29 billion vs analyst estimates of $1.2 billion (8.05% beat)
  • EPS (non-GAAP): $0.22 vs analyst estimates of $0.10 ($0.12 beat)
  • Revenue guidance for Q1 2022 is $1.05 billion at the midpoint, above analyst estimates of $1.01 billion
  • Free cash flow of $160.9 million, up from $51.7 million in previous quarter
  • Gross Margin (GAAP): 65.3%, up from 57.6% same quarter last year
  • Daily Active Users: 319 million, up 54 million year on year

Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.

Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.

Sales Growth

Snap's revenue growth over the last three years has been exceptional, averaging 53.2% annually.

Snap Total Revenue

This quarter, Snap beat analyst estimates and reported an excellent 42.4% year on year revenue growth.

Guidance for the next quarter indicates Snap is expecting revenue to grow 37% year on year to $1.05 billion, slowing down from the 66.4% year-over-year increase in revenue the company had recorded in the same quarter last year.

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Usage Growth

As a social network, Snap can generate revenue growth by increasing user numbers, and by charging more for the ads each user is exposed to.

Over the last two years the number of Snap's daily active users, a key usage metric for the company, grew 20.8% annually to 319 million users. This is a strong growth for a consumer internet company.

Snap Daily Active Users

In Q4 the company added 54 million daily active users, translating to a 20.3% growth year on year.

Key Takeaways from Snap's Q4 Results

With a market capitalization of $51.6 billion, more than $3.69 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by how strongly Snap outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 33.5% on the results and currently trades at $32.72 per share.

Snap may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.