Snap Posts Surprise Adjusted Profit and Stock Jumps

Snap, the parent of Snapchat, reported a narrowed third-quarter net loss and surprised Wall Street investors by posting an adjusted profit.
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Snap,  (SNAP) - Get Report the parent of the photography-focused social-media group Snapchat, reported a narrowed third-quarter net loss and surprised Wall Street investors by posting an adjusted profit. 

The Santa Monica, Calif., company had a loss of 14 cents a share in the quarter, compared with a loss of 16 cents a share in the year-earlier quarter. The latest adjusted profit was a penny a share compared with a 4-cent loss a year earlier.

Revenue rose 52% to $678.7 million from $446.2 million.

A survey of analysts by FactSet had produced consensus estimates of a GAAP loss of 18 cents a share, or an adjusted loss of 5 cents, on revenue of $557 million.

At last check Snap stock had leaped 20% to $34.09. It had closed the regular Tuesday trading session off 0.7% at $28.45. The stock on Monday had touched a 52-week high of $29.08. 

In 2020 through the close of regular trading on Tuesday, the stock had risen 74%.

Daily active users rose 18% from a year earlier to 249 million, Snap reported.

"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," Chief Executive Evan Spiegel said in a statement.

TheStreet chartist Bret Kenwell looks at the outlook for Snap.

Last Friday a Credit Suisse analyst team led by Stephen Yu had affirmed its rating on Snap at outperform and lifted its price target to $32 from $30.

The analysts cited "potential for better-than-expected daily active user growth due to work-from-home along with a revamped Android  (GOOGL) - Get Report app released in more geographies."

He also saw better-than-expected ad revenue. And he said that "Snap is a scarce asset that offers advertisers access to a coveted younger demographic."

At the end of September a Guggenheim analyst, Michael Morris, upgraded Snap to buy from neutral. He lifted his price target on the shares to $28 from $22.

Investors generally "underestimate the long-term advertising market growth potential" and the "sustained revenue and profit growth potential of internet stocks," the analyst said.