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ETFs to Benefit as Snap Shares Surge on Stellar Q1 Earnings

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Snap (SNAP - Free Report) , known for its mobile camera communication application Snapchat, saw its shares gain more than 7.4% on Apr 23 reflecting stellar Q1 earnings results.

The company reported break-even earnings for first-quarter 2021, beating the Zacks Consensus Estimate of loss of 6 cents per share. The company had reported adjusted loss of 8 cents per share in the year-ago quarter. Revenues jumped 75.2% from the year-ago quarter to $769.6 million, beating the consensus mark by 4.1%.

Daily active users (DAU) at the end of the reported quarter were 280 million. Snap added 51 million DAU on a year-over-year basis and 15 million, sequentially. This growth was broad based with year-over-year and sequential growth. Growth on Android platform exceeded iOS growth.

The first quarter of 2021 can also be remembered as Snap’s first-ever quarter of positive free cash flow as a public company, which came in at $126 million. That was up $131 million compared with the prior year.

Geographically, revenues from North America (71.9% of revenues) soared 75.2% year over year to $553 million. Revenues from Europe (14.8%) jumped 48.5% to $113.6 million. Rest of the World (ROW) revenues were $103 million, up 46.4% year over year.

Average revenue per user (ARPU) increased 35.6% year over year to $2.74. On a year-over-year basis, North America and Europe ARPUs increased 66.4% and 35.8%, respectively while ROW declined 7%.

Snap CEO Evan Spiegel also indicated that Snapchat’s Android user base is now larger than its iOS user base, as quoted on CNBC. Snap expects year-over-year revenue growth of 80% to 85% for the second quarter, a considerable increase from the 66% annualized revenue growth recorded in the first quarter. The company also expects to reach approximately 290 million DAUs in the second quarter.

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 Simplify Volt Pop Culture Disruption ETF (the stock takes about 21.37% of the fund), First Trust US Equity Opportunities ETF (FPX - Free Report) (8.60% weight), Global X Social Media Index ETF (SOCL - Free Report) (the stock takes about 7.01% of the fund) and Franklin Exponential Data ETF (XDAT - Free Report) (4.98%) put these ETFs in great focus. Snap’s own stock performance will regulate these funds (see all technology ETFs here).

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