Snap’s Profitability Could Finally Become a Reality with New Redesign of App

It was in early February that the parent company of Snapchat, Snap Inc., reported fourth quarter financial results and surprised Wall Street with an adjusted profit of three cents a share. This is a comparison from a loss of four cents a share and a big jump from breaking even which is what analysts were expecting.

Snap, which has seen many struggles in recent years, including management turnover and a app redesign that didn’t hit well with users, reported an increase of 17% in daily active users for the quarter. Analysts polled by FactSet were waiting for 214.74 million daily active users while Snap reported 218 million. Revenue at $561 million also represented a 44% jump but came in about $2 million below what Wall Street was expecting. Advertising saw record revenue however of $561 million, vs. expectations of $563 million from analysts per FactSet.

“The strength in our core business gives us confidence in our long term growth and profitability and we’re excited to build on these results in 2020 and beyond,” CEO Evan Spiegel had said after the earnings report.

According to The Verge’s Casey Newton, Snap is now carrying out two tests rolled out to a small percentage of Snapchat’s user base. One test is for breaking news headlines inside the app while the other is a redesign of the app’s features and layout. This includes offering five screens instead of three, a relocation of the Snap Map, and a navigation bar.

“We’re exploring ways to streamline navigation across Snapchat, soliciting feedback from our community to inform future versions of our app,” a Snap representative told Business Insider.

Could this new redesign be another flop or finally a chance for Snap to shine? The previous redesign which took place in 2017 was an incredible setback for the company as users hated it and complained that it was too hard to navigate.

Some analysts are still on the fence on where Snap could be headed including Monness Crespi Hardt analyst Brian White who remarked recently, “While we recognize the considerable progress made by Snap in 2019, we remain on the sidelines given competitive risks and the upbeat Street sentiment that has swarmed the stock in recent quarters.”

UBS analyst Eric Sheridan in an optimistic light has maintained a buy rating on Snap stock and a price target of $24. He has said, “While not a material change in the long-term thesis, Snap’s fourth-quarter earnings report contained enough mixed messages to cause a negative reaction in the shares that seemed rational short-term.” Shares of the stock had tumbled 14% on the earnings report.