SNAP Inc. shares traded at the highest level in more than four months Tuesday after the group surprised analysts with a narrower-than-expected fourth-quarter loss as costs came under control and users stuck with its struggling flagship messaging app.
Snap posted a loss of $50.4 million for the three months ending in December, but noted that revenues rose 36% to $389.8 million, beating Wall street’s forecasts, as the average revenue per user on the Snapchat app jumped 36.6% to $2.09. Daily active users on the app, which suffered a PR hit last year thanks to a controversial re-design, held steady from the previous quarter at 186 million, the company said.
With Snap’s shares surging to around $8 during Tuesday’s after hours, the stock is still far from its IPO of $17. Before investors have faith to drive its shares back higher, Snap still has a lot to prove. Snap still has many issues ahead, such as trying to get users older than 35 to join its platform and rolling out its improved Android version of Snapchat, which is currently keeping users on lower-end smartphones away.
However, CEO Evan Spiegel addressed these issues as it follows. “A lot of the drag we were seeing on (daily active users) is coming from Android. We've shifted most of our resources internally to the rebuilt Android, and so we are really waiting for that to roll out broadly. So we continue to improve the Android experience.” He also added “I think for us, broadly speaking, the way to think about it, in terms of Android opportunity, there's roughly 2 billion or so or maybe more than 2 billion people who are on Android and don't have Snapchat. So we can take a few percent market share there to make a really different story”.
In our opinion, Snap’s future looks bright especially after the results of this quarter but their ability to successfully roll out its new Android app throughout 2019, to exponentially increase their user base, will be key to driving better user growth, higher earnings and further multiple expansion.