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Snap Inc. shares shot higher in the extended session Tuesday after Snapchat’s parent company revealed advertising revenue rose above estimates that were diminished by fears of the spread of COVID-19.
But the company said it experienced lower ad growth in its March advertising revenue.
The company reported a first-quarter net loss of $305.9 million, or 21 cents a share, versus a loss of $310.4 million, or 23 cents a share, in the year-ago period. Adjusted for stock-based compensation, among other items, the company said adjusted losses were 8 cents a share. Revenue rose to $462.5 million from $320.4 million in the year-ago period.
Analysts surveyed by FactSet had estimated a net loss of 20 cents a share on revenue of $423.7 million, with sales expectations declining from $468.6 million. For the second quarter, analysts model a net loss of 20 cents a share on revenue of $411 million.
Shares of Snap SNAP, -3.71% surged up to 20% higher in the extended session immediately following release of the results and settled at a gain of roughly 18% ahead of the earnings call at 5 p.m. Eastern time.
Snap reported daily active users rose 20%, to 229 million daily active users in the first quarter, versus 190 million a year ago. Wall Street analysts modeled daily active users to grow to 225 million in the first quarter.
The company said that communications with friends increased by over 30% in the last week of March compared with the last week in February, with more than a 50% increase in some places around the world. Snap also said that the time spent playing games in its app has doubled in March, and has seen a thirty fold increase in the daily downloads of its Snap Camera, which people use for videoconferences and live streaming.
“We are seeing sustained communication volumes on our service that eclipse the peaks we see during major holidays,” Chief Executive Evan Spiegel said in prepared remarks.
The company said it doubled the amount of money committed to the company via upfronts in 2020 versus a year ago, that direct response advertising has doubled as a share of its revenue over the past two years, amounting to half of total revenue.
“While many advertising budgets declined due to COVID-19, we experienced high revenue growth rates in the first two months of the quarter which offset our lower growth in March” Spiegel said. “These high growth rates in the beginning of the quarter reflect our investments in our audience, ad products, and optimization, and give us confidence in our ability to grow revenue over the long term.”
Snap pulled its guidance for the second quarter due to the COVID-19 outbreak.
“As we expected, Snapchat showed strong momentum in usage in [the first quarter],” EMarketer Principal Analyst Debra Aho Williamson said in an email. “Some of the boost likely came in March, when the coronavirus pandemic forced millions of people around the world to shelter at home.”
Snap’s revenue picture was much brighter than many analysts expected, considering that the global pandemic hit ad budgets hard toward the end of the quarter. If advertisers did cut budgets for Snapchat advertising, they may not have done so in large numbers before the end of the quarter. I believe Q2 will be a much more important quarter to watch.”
As people around the world have increased their use social-media sites and internet services in general amid the coronavirus pandemic, Snap is the first internet company to report earnings this season. Facebook Inc. FB, -4.17% already detailed some of those issues earlier this year and Bernstein analyst Mark Shmulik wrote in a note that Snap’s Snapchat app is “the experimental platform that’s susceptible to budget cuts.” The vast majority of the company’s revenue is from Snapchat advertising revenue.
Snap stock has gained 8% in the past year, with the S&P 500 index SPX, -3.06% falling 2.8%.
Additional reporting by MarketWatch staff writer Emily Bary
