Why Snap Stock Is Up By 22% Today

Snap Stock Rallies As Company’s Q2 Report Highlights Strong Growth

Shares of Snap gained strong upside momentum and moved to all-time high levels after the company released its second-quarter results.

Snap reported that its revenue increased by 116% year-over-year to $982 million, easily beating analyst estimates. GAAP loss of $0.10 per share and adjusted profit of $0.10 per share also beat analyst expectations.

The company noted that daily active users (DAU) increased by 23% year-over-year to 293 million, while the average revenue per user (ARPU) was $3.35. It should be noted that DAU increased in all segments and platforms, highlighting the breadth of Snap’s growth.

In the third quarter of 2021, Snap expects to report revenue of $1.07 billion – $1.085 billion. Adjusted EBITDA is projected to be $100 million – $120 million compared to $117 million in the second quarter.

What’s Next For Snap Stock?

The market was very impressed by Snap’s quarterly report, and the stock was up by as much as 22% at the time of writing. This is not surprising as the market remains hungry for growth, and Snap achieved healthy growth in various market segments and platforms.

Currently, analysts expect that Snap will report earnings of $0.22 per share in 2021. In 2022, the company’s profit is projected to grow to $0.67 per share, so the stock is trading at 115 forward P/E.

This is an extremely rich valuation but that’s what the market is ready to pay for a 117% revenue growth. As usual with the high-growth tech stories, the market is looking beyond the next year.

At the same time, rich valuation makes the stock vulnerable to any disappointing news. However, Snap has just released a great quarterly report, so such concerns should not have any material impact on the stock in the near term. The general market remains bullish due to the strong support from the Fed, and traders remain ready to buy expensive growth stocks, which is bullish for Snap.

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