May 24, 2022

Snap Stock Skyrockets Nearly 60% With First Quarterly Profit Ever

Well, look at that: a profit at Snap.

For the first time ever, the 10-year-old social messaging company swung from a loss into the black during the fourth quarter. It booked $22.5 million in net income in that time—compared to a $113 million loss a year ago.

This delighted investors, who’ve been down on Snap lately amid unease about its digital advertising business and disappointing financial results a day earlier from Meta, the Facebook parent company. Snap shares soared 60% in after-hours trading on Thursday.

They needn’t have worried as much. Snap’s fourth-quarter revenue beat Wall Street’s estimates: $1.3 billion, a hair more than the $1.2 billion forecast by analysts. For the year, though, Snap remained in the red. It had a $488 million loss on $4.1 billion in revenue.

Snap worried shareholders in the fall when previous financial figures showed it struggling with changes to Apple’s iOS. Apple now lets users opt out of tracking, making it harder for Snap and others who sell digital ads to target advertisements at users. Like the rest, Snap has rushed to develop new internal ad software for marketers to use, making up for the loss of the Apple data.

Despite the concerns around its ad business, the company has continued to add users. It had 319 million daily users in the fourth quarter, a 20% increase from a year before. On a conference call with analysts, the company admitted that users are sending fewer messages and graviating toward the original TV-style programs on the app and the short-form user-generated videos published in Snap’s Spotlight feed, a new category meant to compete with TikTok.

It didn’t offer any precise numbers about this change. But it seems to be stemming the challenge from TikTok better than Meta. Facebook recorded its first-ever decline in daily users in the fourth quarter and flat growth among monthly users, a reflection that TikTok and, undoubtedly, YouTube are effectively luring away eyeballs. With TikTok’s advance, Meta has repositioned its future around augmented and virtual reality tech. Snap has heavily invested in augmented reality, too, thought its initial forays into the space date back several years earlier.

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