Why Snap Stock Is Up By 47% Today

Snap Stock Rallies After Strong Quarterly Report

Shares of Snap jumped after the company released its fourth-quarter report. Snap reported revenue of $1.3 billion and adjusted earnings of $0.22 per share, easily beating analyst estimates on both earnings and revenue. Snap stated that 2021 was its first full year of positive operating cash flow and free cash flow.

Daily active users (DAUs) totaled 319 million, up 20% on a year-over-year basis. This was a material success compared to the recent report from Meta Platforms, which showed a decline in DAUs and led to a major sell-off of Meta stock.

The average revenue per user (ARPU) increased from $3.49 in Q3 2021 to $4.06 in Q4 2021, serving as an additional bullish catalyst for Snap stock.

Yesterday, Snap stock was under significant pressure as traders sold the company’s shares “in sympathy” with the sell-off in Meta stock. However, Snap’s quarterly report was so strong that the stock gained more than 45% in just one trading session.

What’s Next For Snap Stock?

Snap’s gains look impressive, but traders should keep in mind that the company’s shares touched highs near the $83 level in September 2021, so the stock is still down by more than 55% from its all-time high levels.

In 2022, Snap is expected to report earnings of $0.53 per share, so the stock is trading at 68 forward P/E. Earnings estimates will likely move higher after the strong earnings report, but the stock will still remain in the high-PE zone.

In this light, the near-term performance of Snap stock will depend on whether the market is ready to buy into high-PE stocks again. Recent weeks have been volatile as traders were worried about high inflation and higher Treasury yields.

The yield of 10-year Treasuries is already close to the 2.00% level, which could put more pressure on expensive tech stocks. The recent sell-offs in high-profile names like Meta Platforms, Netflix, and PayPal have also hurt sentiment. Thus, it remains to be seen whether traders will be ready to push Snap stock higher after the strong one-day move.

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