Snap rises more than 50% in a single day as it reports first ever quarterly profit

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Snap first ever quarterly profit

Snap, a 10-year-old social messaging company, reported a profit for the first time in the last quarter. Last year, Snap's shareholders were worried when it reported that it is struggling with changes to Apple's iOS. Apple introduced a new feature that lets users opt-out of tracking. It made it hard for Snap to sell digital ads to target advertisements at users. Snap has rushed to develop new internal ad software for marketers to use, making up for the loss of Apple data.

Let us look at its quarterly numbers to understand what cheered the investors.  Snap fell 23.6% Thursday prior to its own earnings announcement but popped as much as 62% after hours, before settling up about 52%.

Increase in revenue - The revenue increased 42% to $1.3 billion compared to the year-ago period. The revenue is higher than analysts' estimate of $1.2 billion. 

Net Income - Snap reported the first quarter of the positive net income of $23 million in Q4'21. The Earning Per Share (EPS) was 22 cents (adjusted) compared to 10 cents analysts' expectation. Adjusted EBITDA improved 97% to $327 million in Q4 2021, compared to the prior year. For the year, though, Snap remained in losses. It had a $488 million loss on $4.1 billion in revenue.

Cash Flow - Operating cash flow reported by Snap was $186 million in Q4 2021, compared to $(53) million in the prior year. Free Cash Flow was $161 million in Q4 2021, compared to $(69) million in the prior year.

Active Users - Daily Active Users (DAUs) reported by the company was 319 million in Q4 2021, an increase of 54 million, or 20%, year-over-year. Year-over-year growth in DAUs has been 20% or more for five consecutive quarters. DAUs increased sequentially and year-over-year in each of North America, Europe, and the Rest of the World.

Target Price - The 26 analysts offering 12-month price forecasts for Snap Inc have a median target of $60, with a high estimate of $81 and a low estimate of $36.

The company has given financial guidance for Q1'22. The revenue is estimated to be between $1,030 million and $1,080 million. The company expects it will break even on the adjusted EBITDA. The future for the company is now looking much more positive compared to the previous quarter when it reported many issues.