Recently, I predicted that April 25 would be a make-or-break day for Snap (NYSE:SNAP), the owner of the photo-messaging app Snapchat. It was a “make” day and not a “break” day. All signs point to rapid growth for Snap, and the only people who should be worried now are the Snap stock short-sellers.
The sentiment on Snap was bearish in February. The company announced layoff plans for 10% of its global workforce and expected a deep adjusted EBITDA loss in 2024’s first quarter.
SNAP stock snapped like a broken tree limb in February. However, it’s a different story entirely now, and the bears need to join the bull team before they miss out on a terrific buying opportunity.
You Can’t Argue With Snap’s Results
It was amazing to watch Snap shares gain 29% midday on April 26, but the catalyst wasn’t difficult to figure out. Snap reported its first-quarter of 2024 financial and operational results on April 25, and I expected that the company would either be the comeback kid or a complete flop.
In hindsight, we can conclude that Snap is, indeed, the comeback kid. The company’s Q1-2024 revenue rose 21% year over year to $1.195 billion, beating the analysts’ consensus estimate of $1.12 billion.
As I mentioned earlier, Snap expected an adjusted EBITDA loss in the first quarter of 2024. Analysts had expected the company to post an adjusted EBITDA loss of $68 million. Thus, it was a nice surprise when the company reported adjusted EBITDA income (not a loss) of $45.659 million.
Seriously, you just can’t argue with Snap’s quarterly results. The company’s user base expanded during Q1 of 2024, with Snap’s daily active users (DAUs) increasing 10% YOY to 422 million. That’s another reason to be on the long side of the trade with SNAP stock, in case you needed it.
Shining the Spotlight on Spotlight
Plus, here another detail that some folks might have missed. Snapchat has a short-form video feed feature called Spotlight, and it’s a direct competitor to TikTok.
Chances are pretty good that you’re already aware of the potential U.S. TikTok ban. What you might not know is that, according to Snap, the total time spent watching Spotlight content in Q1 2024 “increased more than 125%” YOY.
Now, I’m not suggesting that Spotlight will completely replace TikTok in the U.S. What’s entirely possible, though, is that Spotlight could be a significant revenue generator for Snap.
After all, it’s a good sign that Spotlight’s total watch time more than doubled in just a year’s time. So, keep your eye on Spotlight as you’ll probably be hearing a lot more about it in the coming quarters.
Snap Stock Has Much More Room to Run
It’s stunning to consider that Snap shares once traded at more than $80 apiece. I’m not saying that the stock will get back there next week or next month. Snap’s quarterly results point to a share-price rally with plenty of overhead room.
The Snap stock bull case is undeniable at this point. Just think about Snap’s unexpected quarterly adjusted EBITDA profit, as well as the rapid watch-time growth of Spotlight. With that in mind, it’s a great time to snap up some shares and prepare for huge gains in 2024.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
