Updated April 26th, 2024 at 17:32 IST

Snap shares surges 25% in premarket trading after beating expectations

Snap attributed its better-than-expected performance to upgrades in its ad system and increased demand for features.

Reported by: Business Desk
Snap shares surges 25% in premarket trading after beating expectations | Image:Pexels Photo
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Snap shares surge: Shares in Snap Inc surged nearly 25 per cent in premarket trading on Friday as targeted ads and new features propelled the photo messaging app owner to beat Wall Street expectations for first-quarter revenue and user growth.

Snapchat's parent now anticipates second-quarter revenue between $1.23 billion and $1.26 billion, surpassing analysts' forecasts of $1.22 billion, according to data from LSEG.

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Snap attributed its better-than-expected performance to upgrades in its ad system and increased demand for features aiding brands in driving sales or website clicks.

Meanwhile, social media platform Pinterest saw a 4.4 per cent increase, while Snap's larger rival, Meta Platforms, edged up 1.2 per cent after a sharp decline on Thursday.

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"Revenue per user increased year over year for the first time since early 2022, reflecting the strength in the broader advertising market and Snap's efforts to revive growth," noted Morningstar analyst Michael Hodel.

Snapchat's daily active users rose to 422 million during the quarter, surpassing estimates of 419.6 million. First-quarter revenue saw a 21 per cent growth to $1.2 billion, exceeding estimates of $1.12 billion.

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Despite the positive results prompting 11 Wall Street brokerages to raise their price targets on Snap's shares, most analysts remain cautious, citing the need for more consistent evidence of sustained business improvement.

"Snap's results have historically been choppy, and we are hesitant to extrapolate from one quarter of strong results," stated JP Morgan analysts.

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With an average rating of "hold" from 41 brokerages covering the stock, Snap has experienced a decline of approximately one-third of its value this year, struggling to compete for advertising dollars against industry giants like Meta Platforms.

"While operating margins continue to slowly improve, achieving operating profitability is still several years away, likely not until 2028," Hodel remarked.

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(with Reuters inputs)

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Published April 26th, 2024 at 17:32 IST