Investors and market analysts are seeing more growth potential for Snap, whose Snapchat platform has been undervalued due to strong competition from Facebook’s Instagram (FB).
To date, both Snap (SNAP) stock and earnings are growing at a faster pace than its larger competitor Facebook (FB).
Snap shares have surged nearly six-fold in the past 12 months, up 135.3% in the past six months and 16.8% since the beginning of 2021.
Facebook shares have posted more modest gains of less than 90% in the past 12 months, up 5.7% in the past six months and only 2% since the beginning of 2021.
Snap’s revenues for the last two reporting quarters: the third and fourth of 2020 grew at 52% and 62%, respectively, compared to the same period in 2019, and profits also grew significantly. Snap’s quarterly earnings and earnings statistics for the last 2 years are available here.
Facebook’s revenue growth rates for the third and fourth quarters of 2020 were lower, at 22% and 33%, respectively, compared to the same period in 2019, although profits also grew significantly. Facebook’s quarterly earnings and earnings statistics for the last 2 years are available here.
In addition, Snap managed to post a strong fourth quarter despite a two-week hiatus in ad demand as brand advertisers suspended campaigns after January 6 amid unrest following the storming of the US Capitol.
On a positive note, Snap’s last quarterly reported growth in active daily users to 265 million, up nearly 22% from the 218 million the company reported a year earlier.
In a comment on the latest report, Snap’s CFO Derek Andersen said the company expects revenue growth of 56% to 60% in the first quarter.
That being said, there is uncertainty over Apple’s privacy updates in iOS 14 (coming into effect at the end of the first quarter) that are expected to impact ad targeting.
“It is not yet clear what impact these changes might have on our business dynamics in the long term, and this may only become clear a few months or more after the changes are implemented,” Andersen said.
However, according to Snap executives, Apple’s decision to protect user privacy is in line with Snap’s business: “We really admire Apple and believe they are trying to do the right thing for their customers.”
Snap is working with Apple to prepare for the change, educate its advertisers and make long-term investments to leverage more of its own data for advertising. In addition, the company plans to provide advertisers with more options to provide their products and services to Snap users directly through Snapchat.
By contrast, Facebook executives said Apple’s changes to iOS 14 would hit both Facebook itself and private businesses. Read more in the article “This is why Facebook is so afraid of the iOS 14 privacy changes”.