What’s Going On Here?Snapchat parent Snap Inc. reported stronger-than-expected first-quarter results late last week, and the company’s stock price initially crackled and popped 6% on Friday. What Does This Mean?280 million users were Snapchatting on an average day last quarter, slightly more than investors had expected and schoolteachers had hoped. It’s this attention, or distraction, that Snap sells to advertisers (at ever-higher prices), meaning the company’s revenue exceeded forecasts too. Combined with keen cost-control, Snap’s profit per share broke even last quarter, while analysts had anticipated a narrow loss.
And the good news just kept coming. The firm’s “free cash flow” – what’s left over after necessary reinvestments – was positive last quarter for the first time in its four-year history as a public company. Snap’s also forecasting that this quarter’s revenue will be 80-85% higher than the same time last year, more than investors had thought. Why Should I Care?For markets: What’s good for Snap is probably good for Twitter.
As Snap’s stock rose on Friday, so too did social media rival Twitter’s. No surprise there: the two companies’ share prices have moved in lockstep for much of the year so far. But while a strong performance for Snap should bode well for Twitter’s own forthcoming results, the read-across is less clear for advertising behemoths Facebook and Alphabet: with new costs afoot, there are more curveballs in the mix ahead of this week’s earnings updates.
The bigger picture: Apple’s days may be numbered.
Snapchat also revealed last week that a recent app rebuild has helped its Android user base overtake the iPhone-wielding demographic. The implications of that inversion could be bigger than investors realize: with Apple’s new privacy changes set to make advertising less effective on its platforms, publishers and developers may start focusing more heavily on the Android ecosystem. | 