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Snap Shares Soar More Than 58% After Earnings Show It's Weathering Apple's Privacy Changes

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  • Snap shares skyrocketed after it reported its first-ever quarterly net profit in its fourth-quarter earnings.
  • The social media company reported quicker-than-expected progress with advertisers on Apple's iOS changes that affect targeting ability.
  • In contrast, Meta reported a day earlier the Apple changes would result in a $10 billion revenue hit this year.

Snap shares soared up to 58.2% Friday after the company reported its first-ever quarterly net profit and showed it's seeing quicker-than-expected progress on its transition with advertisers on Apple's privacy changes on iOS.

It's a big recovery from Thursday trading, when shares closed down 24%, Snap's second-worst day ever, as investors appeared to flee social media stocks after Facebook's poor showing on Wednesday evening.

Facebook owner Meta reported weak revenue guidance, which it blamed in part on the Apple changes affecting its ability to target and measure ads. Meta said the Apple changes would result in a $10 billion revenue hit to its business this year.

Shares in Meta, which also saw stagnating user growth, suffered their biggest-ever one-day drop in company history on Thursday. Social media stocks Snap and Pinterest also plummeted ahead of their own earnings reports, as they both seemed to be exposed to similar factors, including ad-targeting changes on iOS, inflation and supply chain disruptions that affect advertiser spending.

But both Snap and Pinterest reported strong earnings, sending their stocks soaring after hours. Pinterest shares were up 11.2% Friday.

"We're still not where we'd like to be," Snap CEO Evan Spiegel said, addressing Apple's privacy changes, in an interview with CNBC's Tech Check on Friday, "but our advertisers were able to adopt a lot of our first-party tools like advanced conversions and estimated conversions which they can use in conjunction with Apple's tools and with other third-party tools for conversion lift and media mixed modeling."

Spiegel also said Snap was less affected by the Apple ad-privacy shift because his company is "much earlier in our monetization journey" and generates a fraction of the average revenue per user that Facebook does, which he said gives Snap more flexibility.

Spiegel also addressed TikTok, which Facebook called out as the main challenge for the company's growth, in the CNBC interview.

"Video entertainment in general on mobile is highly competitive, whether it's TikTok or Instagram or Facebook or YouTube," Spiegel said.

"But TikTok is a unique challenge in that they have a privileged and protected position in the Chinese market that Instagram or Facebook or Google or us aren't allowed to access. So, they're able to take that protected position in the market and generate an excess return, because they don't have to compete with us over there, and then reinvest that in the United States and Europe," he said.

Despite Friday's big gains, Snap still has a long way to go to recover from the sell-off over the past several months. At midday Friday it was trading at about $37, well below its $83.11 52-week high on Sep. 24.

Stifel analysts, which maintained a buy rating on Snap and raised its price target from $45 to $50, wrote in a note Thursday that the difference "between the strength and tone" of both the Snap and Pinterest calls versus the one by Meta raises questions.

"At this point, we chalk it up to Facebook's [small and medium-business]-heavy platform vs. peers, though Snap management seemed to suggest SMBs should be able to navigate these waters just as well," they wrote.

Wedbush Securities analysts, which downgraded Snap to neutral but raised their price target from $36 to $40, also pointed to Snap management's comment that their ad-targeting products were built with privacy in mind to explain the difference between its results and Meta's in relation to the Apple changes.

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