Snap surprised Wall Street on Tuesday with a rebound in user growth for its Snapchat messaging app, showing resilience amid competition with Facebook's Instagram and sending shares up almost 30 percent. More importantly, revenue was up 72 percent year-on-year to $285.7 million, compared to the estimate of $253 million.
After the bell, Snap reported $285.7 million in revenue and a loss of 13 cents a share for the three months ended December 3.
Investors were snapping up shares in after-hours trading, with Snap's stock rocketing 25 percent to about $17.60 a share - coming in above its IPO price from last March. Vetr raised Snap from a "strong sell" rating to a "hold" rating and set a $16.13 target price for the company in a report on Friday, October 13th.
"Our business really came together toward the end of previous year", Evan Spiegel, the cofounder and CEO of Snap, said on a conference call with analysts Tuesday. The report, due out after the bell, will round out the Snapchat operator's rather bleak first year as a public company. Sales for the year as a whole doubled to $825 million.
Analysts are expecting an increase of between 6 million and 7 million users for the quarter being reported today.
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But while Snapchat may still be the go-to place for teens and college students to share photos and short videos with friends, the problem for Snap is that it's hard to monetize that content.
It added 8.9 million daily active users to reach 187 million with a quarter-over-quarter growth rate of 5.05% percent in Q4, compared to 2.9 percent in Q3. The retention rate of new Snapchat users on Android increased by almost 20 percent compared to the year prior, according to prepared remarks.
Facebook and Instagram may have successfully borrowed a lot of Snap's designs, but it still has a few tricks up its sleeves.
During last quarter's earnings call, CEO Evan Spiegel said the company was redesigning Snapchat in response to complaints that its interface was too complicated.
Advertising revenue rose 74 percent to $281 million, as companies advertised more in the key holiday quarter. To encourage more people to use its service, Snap launched a big redesign, continued to add more features to its filters and brought its Stories to the web.