Snap Breaks Even In 1Q As Results Beat Estimates; Shares Up 5%

Snap Inc.’s shares were up 5% in extended-hours trading on Thursday after the social media company reported a break-even quarter on a non-GAAP adjusted basis in 1Q versus a non-GAAP diluted loss per share of $0.08 in the same quarter last year. Analysts were expecting an adjusted loss of $0.05 per share in 1Q.

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Snap (SNAP) posted revenues of $770 million in the first quarter, rising 66% year-on-year and topping consensus estimates of $744 million.

Snap’s CEO Evan Spiegel said, “We began 2021 by achieving our highest year-over-year revenue and daily active user growth rates in over three years during the quarter and delivering positive Free Cash Flow for the first time in Snap’s history as a public company. The strength of our business underscores our relentless focus on product innovation and is a testament to our team’s ability to execute well together over the long term.”

The company had daily active users (DAU) of 280 million in 1Q, up by 22% year-on-year. A majority of DAUs in the first quarter were on SNAP’s Android version. The company also launched Spotlight, a platform that showcases entertaining videos, in countries like India, Brazil and Mexico.

In the second quarter, SNAP expects revenues to range from $820 million to $840 million versus $454 million in 2Q FY20. The company expects to either incur an adjusted loss before interest, taxes, depreciation and amortization of $20 million or breakeven versus an adjusted loss before interest, taxes, depreciation and amortization of $96 million in 2Q of last year. (See Snap stock analysis on TipRanks)

Following the earnings, Oppenheimer analyst Jason Helfstein reiterated a Buy and a price target of $82 on the stock. Helfstein said in a research note to investors, “SNAP is showing strong improvements in monetization as a result of its leading ad platform and continued strong DAU growth. Moreover, SNAP appears to have the pole position in AR [augmented reality] advertising and is now looking at extending its software to 3P hardware.”

“We see SNAP as a strong AR partner to AAPL/GOOG hardware competitors. And we now see reduced risks from AAPL’s removal of IDFA [Identifier for Advertisers], as the delayed rollout allowed more time to work with advertisers to adopt AAPL’s SDK [software development kit],” Helfstein added.

Overall, consensus among Wall Street analysts is a Strong Buy based on 28 Buys, 6 Holds, and 1 Sell. The average analyst price target of $78.34 implies upside potential of about 37.3% to current levels.