Snap Inc (NYSE:SNAP). announced its first quarterly net profit after strong growth in user numbers and said its advertising revenues had recovered faster than expected from changes to Apple's privacy settings.
The social media company posted net income of US$23mln for the fourth quarter of 2021, compared with a loss of US$113mln in the same period in the prior year.
Adjusted EBITDA almost doubled to US$327mln.
Revenue in the final quarter climbed by 42% to US$1.3bn, beating analysts' expectations of US$1.2bn.
Full-year revenue increased by 64% to US$4.1bn, while the net loss for 2021 narrowed by 48% to US$488mln..
Daily active users grew by 20% to 319mln, above market forecasts of 316.9mln.
For the first quarter of 2022, the company said it expects revenue in the range US$1.03bn-US$1.08bn, higher than the US$1.01bn predicted by analysts.
Adjusted EBITDA is estimated to be breakeven.
Daily active users are expected to reach 328mln-330mln in the first quarter, beating analysts' estimates of 327.8mln.
Snap's earnings report came a day after Facebook owner Meta Platforms announced disappointing user numbers and warned that its 2022 revenues could see a US$10bn hit from privacy changes on Apple iOS that make it more difficult to target consumers with advertising content.
In a call with analysts, Snap's chief financial officer Derek Andersen said the company's ad business had recovered from the iOS changes “quicker than we anticipated” because its advertisers were using new ad measurement tools.
Andersen noted that, like Meta, Snap's advertising sector is also impacted by supply chain disruptions and labour challenges.
Canaccord cuts Snap target price
In a note following the earnings release, analysts at Canaccord Genuity (TSX:CF, LSE:CF) reiterated a 'hold' rating on Snap but cut their target price for the stock to $40 from $46. In lunchtime trade in New York, Snap shares were 0.2% lower at $29.36.
The Canaccord analysts said: "Snap reported inline Q1 results, with user growth coming in slightly ahead of expectations thanks to ongoing momentum in the RoW region and strong content engagement, while revenue was above the mid-point of guidance but missed consensus expectations by ~1%."
However, they noted: "While Snap's revenue has grown ~30% QTD, the operating environment remains challenging as supply chain disruptions, labor shortages, inflation, and rising rates, along with heightened geopolitical tensions, have all persisted, and management guided to 20-25% y/y revenue growth in Q2, slightly below consensus, with adj. EBITDA expected to be between $0-50M as Snap continues to invest across the business."
"Despite results that were better than some investors feared, a cautious forward outlook and premium valuation keep us HOLD rated," the analysts concluded.
-- Updates with Canaccord comment --