Snap shares rise on fourth-quarter earnings that beat on sales

Shares of Snap Inc. surged over 3% in after-hours trading on Wednesday, buoyed by the release of its fourth-quarter earnings that exceeded sales expectations. The company, known for its popular Snapchat platform, also unveiled a significant $500 million stock repurchase initiative. For the upcoming first quarter, Snap projected revenue between $1.50 billion and $1.53 billion, slightly falling short of analysts' predictions which had set the bar at $1.55 billion. Despite this, the company's fourth-quarter revenue marked a 10% increase year-over-year, with net income soaring to $45.2 million—an impressive jump of nearly 400% compared to the $9.1 million reported during the same period last year. Snap reported fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $358 million, surpassing the anticipated $300 million. Looking ahead, the company estimated its adjusted EBITDA for the first quarter to be between $170 million and $190 million, with the midpoint beating StreetAccount's forecast of $178 million. However, Snap's daily active users (DAU) in the fourth quarter saw a decline of 3 million from the previous quarter. This drop was attributed to a strategic decrease in marketing expenditure aimed at fostering more profitable growth, as highlighted in a letter to investors. In light of regulatory changes, Snap also implemented platform-level age verification in Australia during the fourth quarter, resulting in the removal of approximately 400,000 accounts. The company's North American DAU stood at 94 million, falling short of the 97 million expected by Wall Street. In an effort to diversify revenue streams, Snap plans to enhance its subscription services, including Snapchat+ and the newly launched Memories Storage Plans, which have seen a 71% year-over-year increase in subscribers, reaching 24 million in the fourth quarter. "We are eager to advance our growth trajectory, broaden our revenue sources, and develop a more financially sustainable business in the coming year," the company stated. Additionally, Snap recently announced the establishment of Specs Inc., a wholly owned subsidiary dedicated to the development and marketing of augmented reality glasses, generating excitement for its future projects.