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Snap Stock Soars 25% After Strong Advertising Sales Drive Q1 Results and Outlook

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Key Takeaways

  • Snap shares soared more the 25% in premarket trading Friday after the Snapchat parent posted quarterly results above analysts’ estimates and issued a better-than-expected current-quarter outlook.
  • The company expects its daily active user count to grow to 431 million by the end of the current quarter, above the 430 consensus view.
  • Recent enhancements to the company’s platform helped it attract small to medium-sized advertisers in the quarter.
  • Snap shares may run into overhead resistance around $15.50 from a trendline connecting a series of price action over the past 22 months.

Snap (SNAP) shares jumped 25% ahead of Friday’s opening bell after the Snapchat owner released quarterly financial results above analysts’ estimates and guided better-than-expected current-quarter earnings and revenue amid robust advertising sales and user growth.

In the March quarter, the Generation Z-focused company posted adjusted earnings of 3 cents per share, whereas analysts had expected a loss of a nickel per share. Revenue of $1.19 billion, which primarily comes from advertising, swelled 21% from the year-ago period and topped forecasts of $1.12 billion.

User And Advertiser Numbers On The Rise

On the user activity front, Snap reported a 10% jump in its daily active users from a year earlier, taking the count to 422 million. Moreover, it expects that number to increase to 431 million by the end of the current quarter, above the 430 million consensus view.

The company’s recent use of machine learning (ML) and other initiatives focused on engaging users to make its platform more effective for small to medium-sized businesses and content creators to reach their audience appears to be paying dividends, with the number of advertisers on Snapchat in that category increasing 85% year-over-year (YOY).

“Given the progress we have made with our ad platform, the leadership team we have built, and the strategic priorities we have set, we believe we are well positioned to continue to improve our business performance,” Snap wrote its investor letter released with the quarterly results late Thursday.

Looking ahead to the June quarter, the company projects revenue of between $1.225 billion and $1.255 billion, with the midpoint of that band coming in above the $1.22 billion Street estimate. It sees adjusted earnings in the period ranging from $15 million and $45 million, which compares to analyst expectations of $15.5 million.

Key Price Level To Watch

After gapping more than 40% lower in late May 2022, Snap shares have traded mostly sideways, with the the 50-day moving average crossing the 200-day moving average multiple times. If the stock continues to move higher following its expected earnings-related jump on Friday, investors should keep a close eye on the $15.50 level, an area on the chart where the price may run into overhead resistance from trendline connecting a series of price action over the past 22 months.

Snap shares were up 25% at $14.25 at around 7:00 a.m. ET.

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As of the date this article was written, the author does not own any of the above securities.

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