Snap Inc. (SNAP) shares surged more than 40% in early trading on Wednesday after the company reported favorable fourth quarter financial results. Revenue rose 72.4% to $285.69 million – beating consensus estimates by $32.74 million – and net losses of 13 cents per share beat consensus estimates by three cents per share. Shares rose in after-hours trading before opening sharply higher and rising during Wednesday's session.

Aside from the top-line financials, user growth exceeded analyst expectations with a 5% increase over the previous quarter. Average revenue per user rose 46% year over year to $1.53, while the cost of revenue per user rose 5% year over year to $1.02. The company had cash and equivalents of just over $2 billion by the end of the year, with its fourth quarter cash burn reaching nearly $200 million. (See also: Snap Crosses IPO Price After Adding Nearly 9 Million Users.)

Technical chart showing the performance of Snap Inc. (SNAP) stock

From a technical standpoint, the stock broke out from trendline and R2 resistance at $16.25 and longer-term trendline resistance at $18.00 to its highest levels since last summer. The relative strength index (RSI) moved to overbought conditions at 80.91, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal more upside ahead over the coming weeks and months.

Traders should watch for some near-term consolidation, given the overbought RSI readings, above $18.00 support levels. After a period of consolidation, the stock could move higher to test its next major trendline resistance levels at around $22.00, which were set back in June of last year. Analysts remain mixed, with Bank of America Merrill Lynch upgrading the stock with a $24.00 price target and Susquehanna downgrading the stock with a $7.00 price target. (For more, see: Snap's VP of Product Announces Exit Amid Crucial Redesign Rollout.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

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