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ETFs to Gain as Snap Shares Skyrocket on Stellar Q3 Earnings

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Snap (SNAP - Free Report) , known for its mobile camera communication application Snapchat, saw its shares gain more than 24% after market on Oct 20 post Q3 earnings results. Snap swung to earnings of 1 cent per share from the Zacks Consensus Estimate of a loss of 6 cents. The company still posted a net loss of $200 million, but that’s a 12% improvement from last year’s numbers. Revenues of $679 million crushed the Zacks Consensus Estimate of $551 million. Revenues grew 52% year over year.

The social-media company had 249 million daily active users (DAU) in the third quarter, up 11 million from the second quarter. Analysts polled by FactSet predicted 5 million net new daily active users sequentially, as quoted on MarketWatch.

 Social-distancing guidelines amid pandemic have helped the company to score such great numbers. The uptick in DAU was more pronounced in the international arena. Rest of the world, which includes the likes of India, Brazil and Philippines saw a 43% surge in DAU.

Snap is benefiting from technological advancements. The company is now rolling out a more streamlined infrastructure for its messaging functions as well as a new navigation bar meant to help people more easily locate various Snap features, like Maps, a MarketWatch article indicated. The company joined forces with Champs Sports, Clearly, Essie, Hoka One One, Kohl’s, Levi’s, Jordan Brand, and Sally Hansen to launch augmented reality-powered virtual try-on experiences.

 Snap expects year-over-year revenue growth of 47% to 50% for the fourth quarter, chief financial officer Derek Andersen said, as quoted on CNBC. The company also expects to reach approximately 257 million DAUs in the fourth quarter, per Andersen. However, the company expects year-over-year expense to increase in the fourth quarter from what it has been year to date.

“While there is continued uncertainty about the macro operating environment, we are pleased with the strength of the underlying momentum we have established with our advertising partners, and we remain highly optimistic about the long-term prospects for our business,” Andersen said, as quoted on CNBC.

ETFs in Focus

While tapping the Snap stock is an option to play this upturn, a basket approach is also a lucrative option as it minimizes company-specific risks. Snap’s presence in Global X Social Media Index ETF (SOCL - Free Report) (the stock takes about 7.41% of the fund), Invesco Dynamic Software ETF (PSJ - Free Report) (5.91%) and Innovator Loup Frontier Tech ETF (LOUP - Free Report) (5.39%) put these tech-related ETFs in great focus. Snap’s own stock performance will regulate these funds (see all technology ETFs here).

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