Last week's biggest gainer among New York Stock Exchange-listed stocks was Snap (SNAP 0.92%), soaring nearly 32% after posting better-than-expected top-line results and encouraging guidance for its latest quarter. Snapchat's parent company has seen its shares skyrocket 65% in 2019, bucking the trend of sharp declines through its first two years of trading. 

However, things are far from perfect. Snap is still losing a lot of money, and the stock continues to trade well below its 2017 IPO price of $17. Can the recent enthusiasm continue deeper into 2019?

Snap video chat feature in action.

Image source: Snap.

Setting a bullish tone

Snap's fourth-quarter report may not seem impressive at first glance. Daily active users clocked in at 186 million, flat with three months ago and a smidgen below the 187 million it claimed a year earlier. Moreover, Snap's adjusted loss widened to $0.13 a share, a lot more red ink than the $0.08 analysts were targeting.

Thankfully for investors, that was the full extent of the bad news in Snap's quarterly update. On the plus side, revenue surged 36% to $389.8 million, comfortably ahead of the 32% the Wall Street pros were targeting.

You don't typically see this kind of heady growth for a platform struggling through flat audience growth, but Snapchat continues to milk more money out of its app users. Average revenue per user sits at $2.07, tame by what other dot-com darling platforms are commanding, but a 37% improvement for Snap over the past year. 

Check out the latest Snap earnings call transcript.

The news also isn't as bad on the bottom line as the quarterly miss may seem to suggest. Operating and free cash flows have improved markedly over the past year, and keeping its cost structure steady over the past several quarters with growing revenue leaves Snap closer to eventual profitability. 

Several analysts responded to last week's update by boosting their price targets. Raymond James analyst Aaron Kessler, for one, checked in with an upgrade. Given the stabilization of daily active users following a sequential slide through the first half of last year, and with marketers flocking to the platform, Kessler went from bearish to neutral on the stock.

Snap investors won't be able to rest easy until the user count improves, but the appeal of the platform is becoming more evident to advertisers. Snapchat claims to reach 70% of the 13- to 34-year-old U.S. audience with premium video ads, a jaded demographics group that's difficult for marketers to reach. 

Heading hesitantly into the future

It's encouraging that Snap was last week's hottest NYSE stock and has been one of this year's biggest winners. It validates my year-end call that Snap would be one of the best performing low-priced stocks in 2019. However, it's also important not to be spoiled by last week's torrid run. 

Shares of Snap have been volatile the week it reports earnings, but let's see if you can spot the disheartening trend as we size up its weekly return through the past two years of quarterly results.

  • Q1 2017 -- down 17%.
  • Q2 2017 -- down 10%.
  • Q3 2017 -- down 18%.
  • Q4 2017 -- up 37%.
  • Q1 2018 -- down 24%.
  • Q2 2018 -- down 3%.
  • Q3 2018 -- down 8%.
  • Q4 2018 -- up 32%.

Snap stock has come through with big moves on its fourth-quarter results, but the shares have fallen sharply every other period. Last week's gain was a great way to kick things off in 2019, but keeping the momentum going won't be easy until either Snap hits profitability or its user base starts growing again.