Why the Snap share price rose 23% in after-hours trade: 60 second wrap

We provide a quick run-down of what drove the Snap share price higher in after-hours trade on Tuesday, October 20.

Camera and social media company Snap Inc – parent company of the popular Snapchat app – saw its share price surge 23.90% to $35.25 per share in after-hours trade on Tuesday after releasing its Q3 FY20 results to the market.

Factoring in that after-hours stock spike, Snap has quietly outperformed the market YTD, up over 100% in that period.

Despite recent share price strength, since IPOing in 2017 the company has broadly struggled, falling below $5 per share in 2018. Since that trough however, the market has grown increasingly confident in Snap's ability to deliver, with the company posting solid improvements across its active user metrics and revenue growth figures over the last 7 quarters.

What caused the Snap share price to jump…in 60 seconds

Centrally, a solid revenue and daily active user beat look to have contributed to Snap’s jump in after-hours trade. For the quarter ending September 30 and on a YoY basis, the company reported:

  • Revenues of $679m, up 52%. Analysts were forecasting Q3 revenues of $559.2m, according to Bloomberg.
  • Daily active users (DAUs) of 249m, up 39m or 18%. Analysts were forecasting Q3 DAUs of 244.6m, according to Bloomberg.
  • User engagement also increased during the quarter, with the average number of Snaps sent per day increasing 25%.
  • Adjusted earnings (EBITDA) of $56m, up from $(42)m in 3Q19 and a reduced net loss of $200m, down from $227m in 3Q19.
  • Free cash flow (FCF) of $(70)m, up $15m.

Commenting on these results, Snap’s CEO, Evan Spiegel said:

'Our focus on delivering value for our community and advertising partners is yielding positive results during this challenging time. We're excited about the growth of our business in Q3 as we continue to make long-term investments in our future.'

Mr Spiegel further added that:

'The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us'

Heading into the Q3, Stifel analyst, John Egbert, speaking of Snap’s longer term outlook, said:

'The company's audience growth, product innovation, and long runway for above-market ad growth should fuel robust levels of growth in FY:21 and beyond.’

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