Shares of social media company Snap Inc (SNAP), which owns Snapchat, are higher in afternoon trading after reporting fourth quarter earnings after the market close on Tuesday.

Q4 RESULTS, Q1 GUIDANCE: Snap reported Q4 adjusted earnings per share of (13c) on revenue of $389.82M, against consensus estimates of (8c) and $375.82M, along with Q4 free cash flow up $49M to ($149M). Notably, Snap reported Q4 daily active users, or DAUs, of 186M, vs.187M last year and 186M last quarter. The company also gave guidance for the next quarter, seeing Q1 revenue in the range of $285M-$310M, against a consensus of $307.18M, and seeing Q1 adjusted EBITDA between ($165M) and ($140M) vs. ($218M) last year.

MANAGEMENT COMMENTARY: Snap CEO Evan Spiegel said, "We ended the year with user engagement stabilizing in advance of the broad rollout of our Android improvements, with overall Q4 daily active users flat quarter-over-quarter and average time spent above 30 minutes per day... We are substantially closer to achieving profitability, with our Q4 adjusted EBITDA loss of $50M representing a 68% improvement when compared to Q4 of last year." He added, "We are seeing our investments in improving the Snapchat experience beginning to bear fruit on iOS. In Q4, our iOS daily active users increased both quarter-over-quarter and year-over-year, and average time spent on iOS grew faster during Q4 than it did last year. This is great progress following our redesign, and we look forward to continuing to grow engagement on our platform."

Snap interim CFO Lara Sweet noted, "Average revenue per user increased to $2.09, an improvement of 37% year-over-year and 31% sequentially... In terms of monetization, total impressions were up 179% year-over-year and 31% sequentially, while pricing was down 48% year-over-year and was up 3% sequentially... While we are not going to give specific guidance on daily active users, we are cautiously optimistic and we do not foresee a sequential decline in daily active users in Q1 2019."

ANALYST REACTION: Raymond James analyst Aaron Kessler upgraded Snap to Market Perform from Underperform with a High Risk/Growth suitability rating following the company's quarterly results. Kessler cited stabilizing DAU trends, continued solid ad growth and an outlook for improved EBITDA performance for the upgrade. Snap can achieve breakeven EBITDA by 2020, Kessler contended, adding that he believes Q1 EBITDA guidance is likely "conservative." The analyst raised his 2019 EBITDA estimate to ($287M) from ($314M) and sees 2020 revenue of $1.91B and EBITDA of ($7M).

Stifel analyst John Egbert was also optimistic, noting that Snap's DAUs were flat at 186M in Q4, which beat consensus estimates, and the company reported strong global ARPU growth of 37% year-over-year. The ARPU gains across regions point to bigger strides toward profitability in 2019 than he was previously expecting, added Egbert, who raised his price target on Snap shares to $10 from $8 but maintained a Hold rating on the stock.

However, Loop Capital analyst Alan Gould was more cautious. He kept his Hold rating and $7 price target on Snap after its Q4 results, saying that while the company posted a good quarter with better adjusted EBITDA driven by strong cost controls and "pleasant" flat DAU's, the quarter was not as strong as the 20%+ move in the stock price seen after hours. The analyst maintained that a fix in Snap's Android version will be critical, particularly outside the U.S., where the OS has much higher share. Gould added that he would be prepared to reassess his target if Snap can grow users or ARPU quicker than projected.

PRICE ACTION: In afternoon trading, shares of Snap Inc are higher by 25.4% to $8.83. [Update: Closing price $8.59]