If you think you had a good day on Friday, then wait to you talk to someone who invests in Snap (NYSE:SNAP) stock.
Shares in the social media company started the day up 40% after the company reported historic quarterly earnings. Shares rose to more than 60% higher, topping $40 per share, before settling at just under $39. That’s a one-day gain of 58%.
How historic were those earnings? Well, the company announced it recorded its first quarterly net profit. That’s something for anyone associated with Snapchat to celebrate, considering the company went public nearly five years ago.
Thursday’s earnings report – and Friday’s big gain – couldn’t have come soon enough for Snap. The company suffered a big loss earlier in the week when fellow social media company Meta Platforms (NASDAQ:FB) had a disastrous earnings report of its own that dragged other social media stocks along with it.
Now Snap has a significant leg up on Facebook. Not in total users, of course. But in momentum.
Snap Earnings at a Glance
First, let’s take a look at that earnings report. Snap recorded fourth-quarter revenue of $1.3 billion, which beat analysts’ estimates of $1.2 billion. Earnings per share came in at 22 cents per share, soundly beating expectations of merely 10 cents per share.
Other metrics were equally positive. Snap said that it had 319 million global daily active users (DAUs) in the quarter, which was better than the 316.9 million that analysts anticipated.
And Snap is doing a better-than-expected job of making money from those users. Its average revenue per user (ARPU) was $4.06, versus the $3.79 ARPU that experts anticipated.
Quarterly guidance for the first quarter is $1.03 billion to $1.08 billion in revenue. That’s also an improvement over the $1.01 billion that analysts are expecting for Q1.
CEO Evan Spiegel said the quarter “marked the end of an exciting and productive year.”
We grew our community, expanded our product offerings, and demonstrated the power of our augmented reality platform, both inside and outside of the Snapchat application. We faced some fresh challenges in 2021, but posted strong results, reflecting substantial progress on our journey to sustainable growth and positive cash flow generation.
The Facebook Factor
In the battle between Facebook (now Meta) and Snapchat, Facebook has always operated from a position of strength. But you wouldn’t know it just watching Facebook operate.
In fact, Facebook has always seemed a little thirsty and desperate when it comes to Snapchat.
Back in 2013, Facebook even made a bid to buy Snapchat for $3 billion – but was soundly rebuffed. As author Billy Gallagher wrote in his book on the matter, Facebook founder Mark Zuckerberg is hyper-focused on finding the next new internet innovation. “If we don’t create the thing that creates Facebook, someone else will,” Zuckerberg writes in his own book.
In that vein, Snapchat is the company that “got away,” according to Gallagher. Snapchat started growing rapidly in popularity, even as Facebook-owned Instagram essentially copied the Snapchat stories feature into its own platform.
Considering how linked these two companies are, it’s not terribly surprising that SNAP stock took a tumble when Meta Platforms reported disappointing earnings last week. True, the company managed to grow revenue by 20% from the previous year, bringing in $33.7 billion for the quarter.
But investors reacted poorly to the announcement that Meta is only expecting revenue growth of 3% to 11% in the first quarter. That’s notable because FB stock hasn’t had annual revenue growth of less than 20% in a decade.
Meta also revealed that Facebook has been losing about 1 million daily users in the last two quarters of 2021. That may indicate that the platform’s global growth is finally stagnating.
So, you can imagine that SNAP investors were pretty darned excited when Snap announced its continued growth and its first quarterly net profit.
It makes me wonder if Zuckerberg’s still paying attention to Snap’s growth – and cyberstalking the one that got away.
I’ll bet he is.
The Bottom Line on Snap Stock
Snap still has a long way to go. And like other social media companies, it faces an incredibly competitive environment with the rising popularity of TikTok. I’m sure there will be others that come down the pike in the future.
But for today, at least, it’s a good day to hold SNAP stock.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.