Snap Inc (NYSE:SNAP) continues to impress Wall Street and make investors happy. Thanks to the company’s ongoing strong financial results, including first-quarter 2021 results that topped analysts’ expectations, Snap stock has been trending steadily higher.
Snap shares are up 245% year-over-year and 24% year-to-date. Since the start of 2019, Snap stock has soared 1,043%.
Snap Inc reported blockbuster third-quarter results on October 20, 2020, and its stock hasn’t looked back, advancing 116% since then.
While Snap stock has been trading in a tight range over the last number of weeks, that has more to do with broader market sentiment than with Snap Inc itself. You simply have to look at the company’s recent financial results to see that.
Note that, of the 36 analysts offering a 12-month price target for Snap stock, 29 (81%) have a “Buy” rating, six (17%) have a “Hold” rating, and one (three percent) has a “Sell” rating.
The average price target from those analysts is $79.15, which suggests a 30% increase from the current level. Their high estimate of $100.00 points to an additional 62.5% upside.
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Snap Stock Overview
Founded in 2011, Snap Inc is the maker of one of the most popular social networking apps, “Snapchat,” which has captured 280 million daily active users. Each day, those users create more than five billion snaps. (Source: “April 2021 Investor Presentation: April 2021,” Snap Inc, last accessed May 3, 2021.)
And there’s more to the company than just Snapchat.
The company also offers “Spectacles,” which are smartglasses that record videos for Snapchat. Its “Bitmoji” app allows people to create their own emojis. “Chat” allows users to create and watch stories. “Snap Map” is a real-time map that shows the location of nearby friends, popular stories, and a heatmap of recent snaps posted.
Snap Inc has also invested heavily in content offerings and augmented reality platforms. During the first quarter, more than 20 million viewers watched Ryan Doesn’t Know, the company’s new “Snap Original” series starring Ryan Reynolds.
Moreover, the number of Snapchatters engaging daily with the company’s augmented reality “Lenses” grew more than 40% year-over-year in the first quarter.
While you might think Snap Inc only caters to teens, you’d be wrong. Most of the company’s global users are between the ages of 18 and 24. Its reach is beyond that, though: more than 75% of the 13-to-34-year-old population uses Snapchat.
And they have a lot of buying power. Millennials, those born between 1981 and 1996, represent the largest generation in U.S. history. They’re expected to drive more than half of the increase in expenditure growth over the next decade.
Members of Gen Z, those born between 1997 and 2015, are still developing brand loyalty, which is a bonus for advertisers who are looking for lifelong customers.
Together, these two generations have over $1.0 trillion in direct spending power. That’s music to the ears of advertisers, who are snapping up space on Snap Inc’s social media platforms.
Great Q1 2021 Results
For the first quarter ended March 31, Snap announced that its revenue increased 66% year-over-year to $770.0 million. Wall Street was looking for revenue of $743.0 million. (Source: “Snap Inc. Announces First Quarter 2021 Financial Results,” Snap Inc, April 22, 2021.)
The number of daily active users increased 22% year-over-year to 280 million.
The company reported a net loss of $287.0 million ($0.19 loss per share), compared to a net loss of $305.0 million ($0.21 loss per share) in the same prior-year period.
Snap reported a first-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $2.0 million, versus an adjusted EBITDA loss of $81.0 million in the first quarter of 2020.
The company’s operating cash flow improved by $131.0 to $137.0 million. Its free cash flow improved by $131.0 million year-over-year to $126.0 million, making this Snap Inc’s first quarter of positive free cash flow as a publicly traded company.
“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,” said Evan Spiegel, CEO. (Source: Ibid.)
Q2 2021 Business Outlook
For the second quarter of 2021 ended June 30, Snap Inc expects to report revenue between $820.0 and $840.0 million, which, at the midpoint, represents year-over-year growth of 82%.
The company also expects to report adjusted EBITDA between a loss of $20.0 million and breakeven, compared to a loss of $96.0 million in Q2 2020.
Snap stock continues to reward buy-and-hold investors because the company continues to report strong financial results.
While Snap Inc’s first-quarter revenue easily topped expectations, its losses were up a little, mainly due to the company’s more aggressive efforts to attract new clients. The company posted strong top-line growth fueled by a higher user count and monetization from advertisers.
All of that should help Snap Inc attract more users and advertisers, and ultimately, make a lot more money.