Snapchat FINALLY Delivers A Rare Earnings Beat But Guidance Has Traders Yeeting Shares Left & Right

Snapchat’s parent company just did something it hasn’t done in a while—delivered an earnings beat that didn’t immediately send investors into a panic spiral. Shares of Snap popped in extended trading after the company posted better-than-expected fourth-quarter results, proving that maybe, just maybe, Evan Spiegel hasn’t been running a charity for Gen Z attention spans after all.

(Source: Giphy) 

For starters, Snap reported adjusted earnings per share of 16 cents, beating expectations of 14 cents. Revenue came in at $1.56 billion, slightly ahead of the $1.55 billion Wall Street had penciled in. Exciting? Sure. Earth-shattering? Not exactly. But for a company that has historically treated earnings expectations like a suggestion rather than a goal, this is progress.

What’s more is that global daily active users mooned to 453 million—above estimates of 451.1 million. Turns out, disappearing sexting selfies never go out of style. However, with that said, don’t think for a second that this is a mystical turnaround for the social media giant. Snap has been grinding through a painful ad business overhaul for years, trying to move away from just slapping brand ads into stories and instead leaning hard into direct-response advertising—aka the kind of ads that make you buy stuff immediately instead of just rolling your eyes and skipping through them.

(Source: CNBC) 

The good news? It’s kinda working. Smaller advertisers are throwing money at Snap’s new ad formats, and CEO Evan Spiegel is out here acting like this was the plan all along. The bad news? It took years of revenue misses, brutal stock declines, and countless “We’re working on it” speeches to get here.

But, but, but… here’s the part that wiped the smug smiles off investors’ faces. Snap’s Q1 revenue guidance came in at $1.325 billion to $1.36 billion, which is actually above Wall Street’s $1.33 billion consensus. But—and this is the kicker—adjusted earnings are expected to land between $40 million and $75 million, missing the $78.5 million analysts were hoping for.

(Source: Yahoo Finance) 

Translation: Snap is making money, but not enough to calm the skeptics. The company blamed higher operating expenses, including hiring, legal fees, and some marketing spend shifting into Q1. You know, the usual corporate excuses for why profits aren’t where they should be.

Initially Snap shares spiked in after-hours trading, but given the company has been a certified disaster over the past year, down over 30% before this earnings report. Investors have been burned so many times by Snap’s volatility that buying this stock feels like playing Russian roulette with your portfolio. Which is why sure enough, after the initial pop, Snap shares dropped over 7% on the day. Why? Because analysts at Rosenblatt (and probably a few other firms) decided to temper expectations, citing that while Snap’s ad transformation is working, its guidance was still a little underwhelming. 

(Source: Giphy) 

So yeah, while Snap finally got some momentum for a hot second, shares were ultimately body bagged due to a few so-called smart fellas at Rosenblatt who were less than impressed on guidance. But regardless, the real question is whether Snap can sustain the growth? The company is leaning harder into video content, which is smart, considering TikTok could still get banned in the U.S. If that happens, Snap suddenly looks a lot more attractive to advertisers and creators scrambling for alternatives. Plus, there’s Snapchat+, its subscription product, which now boasts 14 million subscribers and is on track for $500 million in annual revenue. Not exactly a game-changer, but at least it’s a revenue stream that doesn’t rely on ad dollars.

So with that said, is Snap dead? Far from it, but it’s definitely not out of the woods here. This earnings beat was a nice change of pace, and the advertising pivot is finally paying off—but the company still has a long way to go before it can be considered a real contender in the social media money game. And given share’s have lived up to its historical volatility, making you think one thing, and slapping you in the face the next—it’ll be interesting to see how Snap finishes out the week.

For now, keep an eye on Snap and place your bets accordingly, friends. As always, stay safe and stay frosty! Until next time… 

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Stocks.News holds positions in Snap Inc. as mentioned in the article.