Snap forecasts multiple years of 50%-plus sales growth
The rosy outlook could help assuage concerns that Snapchat, which lets people post and share photos, videos and messages via smartphone, might be peaking in growth.
Snap Inc. shares jumped to a record, reversing an earlier decline, after the social-media company forecast revenue growth of 50% or more for several years, buoyed by investments in more engaging advertising and innovations in augmented reality.
The company, parent of the Snapchat app, is “in a position to drive multiple years of 50%-plus revenue growth,” said Peter Sellis, senior product director, in a presentation Tuesday at Snap’s first-ever investor day. At the event, executives outlined a vision for how Santa Monica, California-based Snap will boost its audience while maintaining user privacy and trust.
The rosy outlook could help assuage concerns that Snapchat, which lets people post and share photos, videos and messages via smartphone, might be peaking in growth. The company still has room to expand after its increased popularity during the pandemic, when advertisers increasingly sought to tap Snap’s augmented reality tools, which let people try on products virtually.
“It is augmented reality that is driving our future,” Chief Executive Officer Evan Spiegel said. “We are doubling down on this strategy in 2021.”
Marketers may also see Snapchat as an alternative venue for ads amid the political turmoil and misinformation on other social media sites.
Snap shares rose to $71.50 at 3:37 p.m. in New York, pushing the company’s market value to more than $105 billion. The stock climbed as much as 15% following the comments, after falling more than 10% earlier in the day. Shares are up more than 40% so far this year.
Analysts, on average, project sales will rise 48% to $3.72 billion this year, according to data compiled by Bloomberg. Snap’s growth is estimated to be 37% for 2022 and 33% for 2023.
Snap Chief Financial Officer Derek Andersen said the company expects operating expenses to increase from a roughly 25% year-over-year growth rate in 2020 to a percentage rate in the “mid-30s in 2021.”
“While our investment levels will be higher in the coming year, we remain committed to sustained full-year adjusted Ebitda profitability, and continued financial progress over time,” Andersen said.
Andersen added that while the company has a strong user base among people age 19 to 24 in established regions such as North America, it expects to see even more growth in international markets. To bolster those gains, the company has added more local content, invested in regional marketing campaigns and offered more language support to products, he said.
“The rest of world region comprises the majority of the global smartphone population, and is the largest driver of our community growth,” he said.