Nervous about buying Snap? Break it, the winning numbers are good
Instantaneous (NYSE:INSTANTANEOUS), which runs the popular social media app Snapchat, which was just released financial results for the first quarter of 2022. This was potentially a watershed event, as SNAP stock was already on a strong downtrend.
The stock was criticized on the day of the earnings release, then slid again the next day. Has Snap performed badly enough to warrant this share price drop?
Keep in mind that investors were also dumping tech stocks during this time. Thus, the SNAP stock may have suffered collateral damage.
Also, the company hasn’t fared badly in the fourth quarter of 2022. For example, Snap grew its user “community” by 18% year-over-year to 332 million. Apparently Wall Street consensus expectation was 331 million, so Snap can claim a slight beat there.
Additionally, Snap grew revenue 38% year-over-year to $1.06 billion in Q2 2022. This result was roughly in line with Wall Street expectations, there is no so nothing to complain about here.
Snap CEO Evan Spiegel celebrated the results by saying, “Our first quarter results reflect the underlying dynamics of our business in a challenging operating environment.
He makes a valid point here. Supply chain issues have taken their toll on many tech-focused companies recently. Yet Snap still managed to demonstrate user base and revenue growth.
In the interest of full disclosure, we must also acknowledge Snap’s final disappointment. Specifically, the company posted a net profit loss of $360 million in the second quarter of 2022, compared to $287 million in the year-ago quarter.
It’s disappointing, no doubt. However, the net loss appears to reflect Snap spending in targeted areas, such as growing the platform’s content offerings and expanding Snap’s ecosystem of products and partners.
Tax stats aside, it’s obvious that Snap is growing its business. For example, Snap recently expanded its global content offering by “partnering with News UK, TF1 and Le Monde in France, and MBC and Al Arabiya in the Middle East”.
That’s a positive sign, and investor reaction to Snap’s earnings report may have been the wrong one. It is therefore the ideal time to buy shares at a reduced price, before Wall Street regains its senses.
As of the date of publication, David Moadel had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
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