Snap Inc. (SNAP) shares rose more than 20% after the company reported better-than-expected fourth quarter financial results. Revenue rose 36.4% to $389.82 million, beating consensus estimates by $12.83 million, and non-GAAP net losses registered at four cents per share, beating consensus estimates by 15 cents per share. Daily active users were also flat sequentially and year over year, which was seen as a positive since analysts were expecting a decline.
CEO Evan Spiegel indicated that the company has focused on building long-term scalability over the past year and succeeded in stabilizing user engagement. Spiegel noted that, by maintaining a relatively flat cost structure and growing full-year revenue 43% year over year, the company is moving closer to achieving profitability. First quarter guidance was in line with expectations at $285 million to $310 million, while EBITDA is projected to be -$165 million to -$140 million, compared with -$218 million a year ago.
Several analysts responded to the bullish financial results by upgrading the stock and raising their price targets.
From a technical standpoint, the stock broke out from an ascending triangle pattern in late January before breaking out from key trendline resistance on Wednesday, Feb. 6. The relative strength index (RSI) moved into overbought territory with a 79.95 reading, but the moving average convergence divergence (MACD) remains bullish after crossing over the zero line. These indicators suggest that the stock could see some near-term consolidation before moving higher.
Traders should watch for some consolidation between R2 support at $7.74 and the 200-day moving average at $9.53 over the coming sessions. A breakdown from R2 support could lead to a retest of key trendline resistance at around $7.00, while a breakout from the 200-day moving average could lead to a significant mover higher, as there's little resistance until $10.50 and then $13.00.
The author holds no position in the stock(s) mentioned except through passively managed index funds.