Snap Inc (NYSE: SNAP) reported fourth-quarter revenue short of expectations, but earnings came in ahead on the back of strong user growth and continued margin expansion, according to Atlantic Equities.
James Cordwell upgraded Snap from Underweight to Neutral, while raising the price target from $14 to $17.
Snap reported fourth-quarter revenue growth at 44% year-over-year, just shy of the consensus expectations of 44.5%. Management cited the shorter U.S. holiday shopping season as the reason and projected 40-47% revenue growth in the first quarter, Cordwell said in the note.
Snap added 8 million daily active users in the fourth quarter, benefiting from the Android app redesign and various product innovations launched in the last 12 months. The analyst said the guidance indicates an addition of as high as 7 million daily active users in the first quarter, suggesting continued momentum.
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Cordwell further noted that, apart from the strength in net adds, engagement per user remains strong, at more than 30 minutes per day.
Despite the revenue shortfall in the fourth quarter, the results indicate Snap’s business is “on a better trajectory” and the continued expansion of its base of active advertisers will likely support solid revenue growth ahead.
Shares of Snap fell more than 7% to $17.52 at time of publication.