Advertisement

Snap shares hit record on bullish sales forecast

Snap Chief Executive Evan Spiegel.
“It is augmented reality that is driving our future,” Snap Chief Executive Evan Spiegel says.
(Jae C. Hong/ Associated Press)

Snap Inc. shares jumped to a record, reversing an earlier decline Tuesday, after the social media company forecast revenue growth of 50% or more for several years, buoyed by investments in more engaging advertising and innovations in augmented reality.

The company, parent of the Snapchat app, is “in a position to drive multiple years of 50%-plus revenue growth,” Peter Sellis, senior product director, said in a presentation Tuesday at Snap’s first investor day. At the event, executives outlined a vision for how the Santa Monica company will boost its audience while maintaining user privacy and trust.

The rosy outlook could help assuage concerns that Snapchat, which lets people post and share photos, videos and messages via smartphone, might be peaking in growth. The company still has room to expand after its increased popularity during the pandemic, when advertisers increasingly sought to tap Snap’s augmented reality tools, which let people try on products virtually.

“It is augmented reality that is driving our future,” Chief Executive Evan Spiegel said. “We are doubling down on this strategy in 2021.”

Advertisement

Marketers may also see Snapchat as an alternative venue for ads amid the political turmoil and misinformation on other social media sites.

Snap shares rose $7.04, or 11.1%, to $70.45 on Tuesday, pushing the company’s market value to more than $105 billion. The stock, which had fallen more than 10% earlier in the day, climbed as much as 15% after the comments. Shares are up more than 40% so far this year.

Analysts, on average, project sales will rise 48% to $3.72 billion this year, according to data compiled by Bloomberg. Snap’s growth is estimated to be 37% for 2022 and 33% for 2023.

Snap Chief Financial Officer Derek Andersen said the company expects operating expenses to increase from a roughly 25% year-over-year growth rate in 2020 to a percentage rate in the “mid-30s in 2021.”

Advertisement

“While our investment levels will be higher in the coming year, we remain committed to sustained full-year adjusted Ebitda profitability, and continued financial progress over time,” Andersen said.

Although the company has a strong user base among people ages 19 to 24 in established regions such as North America, it expects to see even more growth in international markets, Andersen said. To bolster those gains, the company has added more local content, invested in regional marketing campaigns and offered more language support to products, he said.

“The rest of world region comprises the majority of the global smartphone population, and is the largest driver of our community growth,” he said.

Bloomberg writer Sarah Frier contributed to this report.


Advertisement
Advertisement