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Stock Analyst Update

Snap's Results Comfortably Beat Consensus

We are maintaining our fair value estimate on the no-moat firm, and it is trading at a significant discount.

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 Snap’s (SNAP) fourth-quarter numbers comfortably beat our internal estimates and the consensus as the firm continues to display improvement in user monetization while maintaining cost control. While user growth was pretty much nonexistent, as expected, Snap’s efforts to increase user engagement and ease ad buying, along with offering tools to attract various types of campaigns, appear to be bringing in more advertisers and ad dollars. We remain confident that with further cost control as demonstrated during the last 12 months, Snap is likely to become profitable during the next five years. 

We are maintaining our $14 per share fair value estimate on Snap. Although Snap shares are up more than 20% in after-hours trading in reaction to the good numbers, this no-moat and very high uncertainty name continues to trade at a significant discount to our fair value estimate.

Snap reported total revenue of $390 million, up 36% year over year as surprisingly the firm’s number of daily average users, or DAUs, declined by only 1% from last year and remained steady sequentially at 186 million. More effective monetization, as more advertisers and ad dollars are jumping on the firm’s platform, drove Snap’s top-line growth with average revenue per user, or ARPU, growing 37% year over year to $2.09.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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