What Happened: Shares of social network Snapchat (NYSE: SNAP) jumped 6.1% in the afternoon session after social media and online advertising peer, Pinterest (NYSE:PINS) reported first-quarter results with revenue exceeding analysts' expectations on higher-than-expected MAUs (monthly active users).
Management called out progress with product innovation, including Direct Links, API for Conversions and automated bidding. Pinterest also previewed further product innovation around bidding and dynamic creative optimization solutions to help advertisers on the platform.
Contributing to the strong topline performance, next quarter's revenue guidance came in higher than Wall Street's estimates. The big bright spot was actually next quarter's implied operating profit guidance--while Wall Street was expecting a loss, the company guided to a nice profit instead.
Overall, we think this was a really good quarter, highlighting strong demand within the digital ad space.
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What is the market telling us: Snap's shares are quite volatile and over the last year have had 17 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago, when the stock gained 27.5% on the news that the company reported first-quarter results with revenue beating expectations, driven by better-than-expected daily active users. Its revenue growth and higher operational efficiency also enabled it to post positive EBITDA and free cash flow, beating Wall Street's pessimistic estimates.
The company noted strong momentum in its Snap Star program, which seeks to bring social media influencers into its platform to drive engagement. This helped contribute to a tripling of Snapchat+ subscribers and 125% year-on-year growth in total time spent watching Snapchat Spotlight content. The number of small- and medium-sized businesses advertising on Snapchat also grew 85% year on year.
Lastly, next quarter's revenue, EBITDA, and daily active users guidance surpassed estimates. It expects to have 431 million daily active users.
Overall, this was a strong quarter that should satisfy shareholders.
Snap is down 1.8% since the beginning of the year, and at $15.86 per share it is trading 9.1% below its 52-week high of $17.45 from February 2024. Investors who bought $1,000 worth of Snap's shares 5 years ago would now be looking at an investment worth $1,415.