Investors were quick to reward Snap Inc. generously on Wednesday, February 7th, as the technology and social media company’s shares jumped to 39 percent after its unexpected positive earnings report.
The Evan Spiegel-led company surprised industry analysts on Tuesday, Feb. 6, when it reported total revenue of $286 million in its fourth quarter of 2017, a 72-percent increase from a year earlier, due to strong user and advertising growth. The revenue figure blew away analysts’ prediction of $253 million.
The earnings report was published after the market closed, and the stock price crashes into $19.52 in morning trading at New York Stocks Exchange (NYSE), the highest it has been since last June 2017. Snap Inc.’s stock price soared to $27.09 on the day of its Initial Public Offering (IPO) last March.
Stock shares were down to $19.08 in early afternoon trading at Wall Street, but still well above the $14.05 price the company closed on Tuesday.
Snap’s flagship mobile app, Snapchat, added 8.9 million daily active users in the fourth quarter of 2017 ended December 31. That’s the largest leap since the third quarter of 2016. The tech firm now has 187 million daily active users, eclipsing market analysts’ estimates of 184 million.
Snap posted a net loss of $350 million in the fourth quarter, which was significantly well under analysts’ estimates of $410 million.
Barclay analysts expect the Snap’s stock to continue sloping upward “as the narrative changes from 2017’s ‘[Facebook] is going to crush SNAP’ to 2018’s ‘users and revenue accelerate and the platform is under-monetized.”
Snap’s share-price climb comes at a time when technology stocks are getting battered in the middle of stock market volatility.
In rough times, tech stocks often take the first beating, according to Lawrence Harris, a finance professor at University of Southern California’s Marshall School of Business. That’s because the technology industry’s valuations largely rest of what the companies might be able to fulfill in the coming future, so investor optimism or pessimism can lead to notable fluctuations in stock price.
Snap’s co-founder and chief executive, Evan Spiegel, credited the newly redesign of Snapchat app, an improved user experience for Android app and a move to programmatic advertisement buying — an automated auction for advertisers — for turning around the firm’s trajectory.
Programmatic ad buying lowers advertisement rates due to its efficiency, but the company was able to balance it by adding more advertisers on-board.