Snap (NYSE: SNAP) recently released its Q4 results, with revenue and earnings exceeding the street estimates. It reported revenue of $1.56 billion and adjusted earnings of $0.16 per share, compared to the consensus estimates of $1.55 billion and $0.14, respectively. However, the company’s outlook fell short of expectations, resulting in lower levels for SNAP stock post the results announcement. Separately, see What’s Happening With Google Stock?
SNAP stock, with -37% returns since the beginning of 2024, has underperformed the S&P 500 index, up 27%. The stock has been volatile lately amid developments around the banning of TikTok operations in the U.S. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did Snap Fare In Q4?
Snap’s revenue of $1.56 billion in Q4 reflected a 14% y-o-y increase, led by strong paid subscriber growth. Snapchat+ member base reached 14 million subscribers, versus 12 million in Q3. Daily active users climbed 9% to 453 million, and average revenue per user of $3.44 was up 4.6% y-o-y. DAU was better and ARPU was in-line with the street estimates. Snap’s adjusted EBITDA margin surged 600 bps y-o-y to 18% in Q4’24. Higher revenues and margin expansion resulted in adjusted earnings surging 2x to $0.16 per share, versus $0.08 in the prior-year quarter.
For the first quarter, Snap’s guidance projects revenue of approximately $1.34 billion, slightly exceeding analysts’ expectations of $1.33 billion. However, the company’s projected adjusted earnings of $57.5 million (at the midpoint) came in below the consensus estimate of $78.5 million.
What Does This Mean For SNAP Stock?
Despite reporting positive fourth-quarter results, SNAP stock experienced an 8% decline following the announcement, primarily attributed to a subdued outlook for the first quarter. Even if we look at a slightly longer period, the changes in SNAP stock over the recent years have been far from consistent, with annual returns being considerably more volatile than the S&P 500.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could SNAP face a similar situation as it did in 2021, 2022, and 2024 and underperform the S&P over the next 12 months — or will it see a recovery? We estimate Snap’s valuation to be $13, reflecting over 20% upside from its current levels of around $11. Our forecast is based on 4x trailing revenues, aligning with the stock’s average P/S ratio over the last three years.
While SNAP stock looks like it has ample room for growth, it is helpful to see how Snapchat’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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