Tech and growth stocks are continuing to be as volatile as ever. Last week, some of the biggest intra-day swings happened after Facebook/Meta reported its worse-than-expected Q4 results. Following the news, a number of associated social-media stocks ended up crashing as well. This included Snap (NYSE: SNAP), whose stock crashed as much as 25% on Thursday. However, the company quickly saw an amazing rebound after reporting its fourth-quarter results, with shares jumping over 58% following the news.
Tech stocks have been hammered in recent weeks following Apple’s updated privacy policies. Among other things, these new policies would prevent apps from tracking online activity for advertising purposes. As you’d expected, this change ended up hurting many social media companies whose revenues mostly relied on advertising, as they can no longer offer pinpointed ads to viewers.
However, it seems this change didn’t have that much of an impact on Snap’s top line figures. The company reported a fourth-quarter revenue of $1.3 billion, 42% higher than from a year ago while also beating out the $1.2 billion most analysts were expecting. Additionally, daily active users on Snapchat was up 20% from last year to 319 million, once again edging out over the 316.5 million originally anticipated.
Additionally, Snap’s Q4 results marked the first quarter of net income since the company went public via an IPO. Snap saw net earnings of $22.5 million for Q4, compared to the net loss of $113 million in the previous year.
What’s also helping Snap is that it’s a much smaller company than many of its competitors. While it only has only 300 million daily users, companies like Facebook/Meta have over 2.9 billion active users. Snap is also a much younger company in general.
While the results were certainly solid, it’s hard to say whether they justify Snap’s massive surge in stock price on Friday. Shares were up over 58% following the news. Part of this jump had to do with Thursday’s crash, but it also has to do with the fact that investors are more jittery than ever when it comes to tech earnings.
“Is a 25%+ drop in FB post that guide and conf call really a healthy sign for this equities market and tech sector. I think not. I was around during the dot-com rally and bust and the FB, SNAP, AMZN, PYPL moves this week remind me of that market over 20 years ago,” warned Jordan Klein, an analyst at Mizuho.
While most big tech stocks have already reported their results, it does go to show that the markets are getting paranoid about how tech and growth stocks will far going forward. The usual reasons for this paranoia include the planned interest rate hikes for 2022, continued inflation, and the possibility of a broader economic slowdown.
Snap Company Profile
Snap, which refers to itself as a camera company, has one of the most popular social networking apps, Snapchat, in developed regions such as North America and Europe. The firm has approximately 158 million daily active users. Snap generates nearly all of its revenue from advertising with 88% coming from the U.S. The firm is headquartered in Venice, California. – Warrior Trading News
