Snap Inc. topped Wall Street’s sales, earnings and user growth estimates when it posted its Q4 financial performance on Thursday afternoon. But instead of seeing its share price climb in after-hours trading, as you might’ve expected following a strong quarter, Snap’s share price dropped 8%, after the company warned its ad business got off to a slower-than-expected start during the first weeks of 2021.
Snapchat added 16 million daily users during Q4, up 22% year-over-year to 265 million people overall. The company also posted $911 million in revenue, beating estimates of about $856 million, while its adjusted earnings of 9 cents per share also topped the 7 cents per share Wall Street projected. The company’s Q4 sales were up 62% year-over-year.
Snap entered Thursday on a roll, with the company’s share price more than doubling since it reported an unexpected adjusted Q3 profit in October. That momentum took a hit after Snap’s Q4 report was posted, though, with its stock price dipping from about $58.60 per share to below $54 per share in early after-hours trading. Investors may have been reacting to Snap projecting it would lose between $50 million-$70 million on an adjusted EBITDA basis during the first quarter, compared to analyst projections of approximately $20 million.
Another likely factor was CFO Derek Andersen warning the app got off to a slow start in Q1, after advertisers paused their campaigns for two weeks following the Jan. 6 attack on the U.S. Capitol. Andersen said, “We started the quarter slower than we would have otherwise expected” in his prepared remarks. On top of that, Andersen said it was “not clear” what the long-term impact to the company’s ad business would be due to upcoming changes to the iPhone’s operating system.
The company’s Q4 net loss dropped 53% from the same time a year ago to $113 million. Snapchat also projected it would add another 10 million daily users during the first quarter of 2021.
“We’re grateful for the opportunity to serve our community and partners through this challenging period of time,” Snap CEO Evan Spiegel said in the company’s letter to investors. “Our team has worked tirelessly to help people stay close with their friends and family even while they are physically apart, and we’re proud of the strong results we delivered for our advertising partners this quarter and over the full year. We delivered our first full year of Adjusted EBITDA profitability and, as we look towards the future, we’re excited to build on our investments in augmented reality, mapping and content to drive our ongoing growth.”
Midway through the fourth quarter, Snap rolled out “Spotlight,” a new hub featuring user-generated content. Users are able to submit their pictures and videos for review, and if selected by Snap to be included in its Spotlight tab, they can get paid, with Snapchat paying users up to $1 million per day to showcase their content. On Thursday, Snap said the platform had reached 100 million monthly users by January.