Pinterest And Snap Show V-Shaped Recovery; Cloudflare Guns For Zero-Trust

Snap has invested in content to support the launch of spotlight and plans to continue to make this a focus area moving forward.These investment areas are the main reason for Snap’s adjusted EBITDA target coming in below consensus. 

Snap management tempered expectations for 2021 when discussing how the iOS platform policy changes could affect their business: “We anticipate that the iOS platform policy changes to be implemented later this quarter will present another risk of interruption to demand in the period immediately after they are implemented. It is not clear yet what the longer-term impact of those changes may be for the top-line momentum of our business, and this may not be clear until several months or more after the changes are implemented.”

Snap showed tremendous growth in Q4 and continues to be a key tool for advertisers that are trying to reach a younger audience. On average, DAUs opened the app 30 times a day in the fourth quarter with an average of over 5 billion snaps created each day.CEO Evan Spiegel indicated that he expects Snap to accelerate its full year growth rate in 2021 to above the 46% number the company recorded in 2020. 

Cloudflare

Cloudflare (NET) announced Q4 earnings results on February 11th.Adjusted EPS of ($0.02) beat consensus estimates by $0.02 while adjusted operating margin of (7.9%) improved 1.7% on a YoY basis.Revenue of $126M grew 50% YoY, topping consensus expectations by $7.6M. 

Gross margin declined slightly on a YoY basis to 77.6% from 78.2% a year ago.Management attributed this decline to the fact that they did not raise prices because they did not want their customers to end up with a surprise bill during the pandemic.FCF was negative $23.5M, representing a FCF margin of (18.7%).  

For Q1, Cloudflare sees $130.5M in revenue at the midpoint, coming in above the $126.2M consensus. Loss per share is expected between $0.02-0.03 vs. the $0.03 loss estimate. Full year 2021 guidance also topped analyst estimates with management expecting revenue of $591M versus a $561M consensus. On the bottom line, Cloudflare is expecting a loss per share of $0.08-0.09 for the FY21 versus the $0.09 loss estimate.   

Q4 was a strong quarter for Cloudflare despite the initial 6% decline in the stock on Friday following the announcement of these results. NET shares were up 20% YTD coming into the earnings report, creating a potential profit-taking scenario following Q4 results. 

CEO Matthew Prince highlighted the company’s growth in paying customers accounts and large customer accounts in Cloudflare’s Q4 earnings call: “Our paying customer accounts grew to over 111,000, up 10% quarter-over-quarter and our strongest quarterly growth in several years.

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