Snap Inc, the tech camera company that owns Snapchat and Bitmoji, may finally be making some headway toward profitability.
The company’s most recent quarterly earnings report gave some much-needed good news to investors, revealing record earnings carried on the back of an increase in online advertising.
A Difficult 2018
Though Snap Inc owns four properties (Snapchat, Bitmoji, Spectacles and Zenly), it is best known for the Snapchat multimedia app.
Given the surge in leaked photos and other scandals that have plagued social media users in recent years, the brief window in which Snapchat images remain available made the app seem ideal for privacy-minded users. Unfortunately, a redesign of the app heading into 2018 caused significant problems for the company.
This came to a head in February 2018 when Kylie Jenner criticized the redesign on Twitter; the popularity of her tweet reportedly led to market value losses for the company in excess of $1.3 billion. Snap Inc has struggled to regain its value in the year since, posting significant losses every quarter and leaving some investors concerned about the social media firm’s long-term viability.
Closing the Loss Gap
Snap Inc’s most recent earnings report, released late in the day on February 5, showed the company reporting record revenue in the fourth quarter of the fiscal year.
Sales for the quarter were reported at $389.82 million, which was over $14.6 million higher than what was estimated by analysts. This was not enough for the company to turn a profit in the quarter, but it did reduce the per-share losses for investors to simply four cents per share.
The revenue boost is largely attributed to adjustments to the company’s advertising platform, intended to make it more profitable for Snap Inc while delivering stronger results for advertisers. CEO Evan Spiegel referred to this in a press release that accompanied the earnings report, stating this: “In 2018, we focused on building a foundation to scale the business over the long-term by driving sustainable product innovation, scaling our advertising platform, and hiring the leadership team that will help us achieve our future goals.”
Profit in the Future?
With the loss gap shrinking, there is hope for investors that the company will turn a profit in the new fiscal year.
Costs associated with Snapchat and the company’s other platforms have remained largely flat for the past five quarters, while year-over-year revenue has increased by 43 percent. User engagement has stabilized after the turmoil of 2018, and investor confidence after the earnings release drove share prices up a full 22 percent in after-hours trading.
With no apparent issues to derail the company’s momentum, continued growth and a turn to profitability should be a snap.