Snap stock reversed lower in Wednesday trading after initially gaining following its fourth quarter earnings report late Tuesday. Despite strong results, the Snapchat parent company gave a mixed outlook for its March quarter and faces uncertainty over whether rival app TikTok will be banned in the U.S.
Snap stock dropped more than 8% to close at 10.63 on the stock market today. Shares had gained more than 7% in aftermarket trading Tuesday that immediately followed the report.
Snap Q4 By The Numbers
Snap earned 1 cent per share on sales of $1.56 billion for the December-ended quarter, the company said late Tuesday. Analysts polled by FactSet earlier projected the Santa Monica, Calif.-based company would post a loss of 4 cents per share on sales of $1.55 billion. For the same period a year earlier, Snap posted a loss of 15 cents per share on sales of $1.36 billion.
Daily active users for Snapchat increased 9% year over year to 453 million, ahead of expectations for 451 million, according to FactSet.
"In 2024 we made significant progress on our core priorities of growing our community and improving depth of engagement, driving top line revenue growth and diversifying our revenue sources, while building toward our long-term vision for augmented reality," Snap Chief Executive Evan Spiegel said in a news release.
Snap Stock: Q1 2025 Outlook
For the current quarter, Snap guided for sales of $1.34 billion at the midpoint of its range, through a letter to investors. Analysts were previously projecting $1.33 billion in Q1 sales, according to FactSet.
However, Snap's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) forecast came in lower than expected. The company expects the core-profit metric to reach $57.5 million in Q1, based on the midpoint of its range. Analysts were projecting $79 million.
Snap said in its investor letter that the profit outlook reflects "investment plans for the quarter ahead."
On a call with analysts, CEO Spiegel said Snap's advertising sales have been helped by its push into direct-response advertising, a term for ads that prompt the user to take actions such as clicking a product page. He also said that the company's $3.99-per-month Snapchat+ subscription product doubled in subscribers in 2024 to reach 14 million.
"We are encouraged by Snap's results that continue to have a growing contribution from higher-value direct-response and Snapchat+ revenues, and 1Q outlook that suggests limited deceleration and opportunity for new revenue drivers," BofA Securities analyst Justin Post told clients early Wednesday.
"However, user growth remains limited in high value US/EU markets, the app transition rollout suggests mixed results, and big EBITDA upside seems less likely given growing expenses," he added. Post holds a neutral call on Snap stock.
TikTok Ban Impact On Snap
Bernstein analyst Mark Shmulik wrote Wednesday that Snap's Q4 results carried a "TikTok shadow." Under a law that took effect Jan. 19, TikTok is banned in the U.S. unless its Chinese parent company ByteDance sells the app. But President Donald Trump paused enforcement of the TikTok ban for 75 days through an order Jan. 20. TikTok remains unavailable for downloads within the U.S. in both Apple's and Google's app stores.
With low expectations ahead of Snap's Q4 report, "the only story that mattered was whether TikTok gets banned or not," Shmulik wrote. "It's impossible to ignore the billions of ad dollars (and) 170 million users worth of minutes that would be up for grabs if TikTok were to disappear."
In the meantime, Shmulik added, Snap's results show a "step in the right direction." He holds a market-perform call on Snap stock.
On that note, Spiegel told analysts Tuesday that the company is "not trying to draw too many conclusions" from the engagement it saw on Snapchat after TikTok shut down for one day, prior to Trump's order.
"I would say that the overall environment of uncertainty is benefiting our business," Spiegel said. "I mean, certainly advertisers are very focused on contingency planning and diversifying their spend. And I think the same goes for creators who are really thinking hard about how they can build the most diversified engagement with their fan base across various platforms, including Snapchat."
Snap Stock Technical Rating
Snap stock is down 1.3% so far this year, including Wednesday's slide. Shares have lost more than 30% over the past 12 months. Shares fell below Snap's 21-day and 50-day moving averages.
Meanwhile, Snap stock has an IBD Composite Rating of 60 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
