By Jon Swartz
Snap Inc. shares plunged 14% after the company’s fourth-quarter earnings fell short of Wall Street estimates on Tuesday, momentarily blunting a year-long financial bounce-back.
Advertising led the way for Snap /zigman2/quotes/205087158/composite SNAP -1.53% to record revenue of $561 million, vs. expectations of $563 million from analysts polled by FactSet.
The social-media company said it lost $240.7 million, or 17 cents per share, compared with FactSet estimates of a 12-cent loss per share. Some $100 million went to a settlement over a shareholder lawsuit in which investors allege Snap misled the public about how competition from Instagram had affected the company’s growth.
Daily-active users, a key measurement of the company’s popularity, rose 17% to 218 million. Analysts polled by FactSet had expected 214.74 million.
“The strength in our core business gives us confidence in our long term growth and profitability and we’re excited to build on these results in 2020 and beyond,” Snap Chief Executive Evan Spiegel said in a statement announcing the results.
The company did offer an encouraging sales forecast of $450 million to $470 million -- roughly in line with the $461 million forecast by FactSet in Snap’s fiscal first quarter.
Beth Kindig, an independent analyst in San Francisco, closely tracked Snap’s DAUs after it reported a spike in the second quarter because of new filters and features. Absent any notable filters and features of late, she was curious to see if Snap was able to retain DAU growth amid competitive pressure from Facebook Inc.’s /zigman2/quotes/205064656/composite FB +0.60% Instagram and ByteDance’s Tik Tok video-sharing social-networking service.
DAUs are essential to Snap’s ability to draw advertising, the lifeblood of the company. And, for now, analysts are sold on Snap’s recent progress. Average revenue per user was $2.58, shy of the $2.62 forecast by FactSet.
Snap’s rare revenue miss -- its first in seven quarters -- was hampered in part by the success of Facebook Inc.’s /zigman2/quotes/205064656/composite FB +0.60% Instagram. The photo-sharing app hauled in about $20 billion in advertising revenue last year, roughly a quarter of Facebook’s sales, according to a Bloomberg report .
“(R)eflecting upon our recent conversations with advertisers ahead of earnings and 2020 ad budget allocations, we gain increased confidence that Snap can deliver outsized revenue growth going forward,” UBS analyst Eric J. Sheridan said in a Jan. 16 that raised its rating on Snap shares to Buy from Hold while increasing its price target to $24 from $16. (Snap shares closed Tuesday at $18.99.) Sheridan projects Snap’s advertising sales will grow 39% in 2020 and 33% in 2021.
Snap shares have surged 169.7% over the past 12 months, compared to a gain of 20.5% for the broader S&P 500 /zigman2/quotes/210599714/realtime SPX -0.30% .