Snap demonstrates profit: can we talk about a steady trend?
The report for the fourth quarter, which the social network Snap Inc. (SNAP) published last week, showed a steady improvement in several areas at once. Moreover, the company established a profit for the first time, albeit a small one so far.
Investors have not always been optimistic about Snap. One of the reasons was the company’s unprofitability, which lasted for more than ten years. However, last week the social network showed a profit for the first time: $0.01 per share.
The expansion of the user base increased revenue per user and a slower increase in expenses. Currently, the number of Snap’s daily active users is 319 million, and the average revenue per user has reached $4.06.
One factor that helps Snap increase revenue is that the company on brand advertisers who need awareness and attention rather than direct responses to advertising. For this reason, Snap has not been affected by changes to Apple’s privacy policy in the same way as it happened with competing social networks. Another positive trend is an improvement in the cost-income ratio.
Snap Inc. said operating expenses as a percentage of revenue fell from 41% a year ago to 34% in the fourth quarter of 2021, which was one of the reasons why Snap was able to report net income of $23 million and free cash flow of $161 million. Operating expenses have remained unchanged over the past three quarters, and if the trend continues, Snap could generate positive cash flow in the long run. Thus, Snap’s fourth-quarter profit may be the beginning of a new period in the company’s history.
