Published: Wed, February 07, 2018
Markets | By Josh Butler

Snapchat shares skyrocket on first earnings beat with revived user growth

Snapchat shares skyrocket on first earnings beat with revived user growth

Snap's good news extended to usage metrics, with Snapchat adding 8.9 million daily active users in Q4 - the highest net addition since Q3 of 2016.

Daily active users rose 18 percent from a year earlier, reversing a trend of slowing growth. This gave investors hope, as they thought that a big change in the app might give it the boost of energy required to regain the user growth rates it once enjoyed.

Excluding certain items, the Los Angeles-based company reported a loss of 13 cents a share, compared to the 16-cent loss analysts predicted. That means Snap is trading right around the price that it sold for during its IPO of $17.

"This was a monster quarter relative to bearish expectations", analyst Daniel Ives of GBH Insights said, cautioning however that "competitive headwinds abound with Instagram front and center". Money made off those ads is usually split - Snap keeps some and pays some back to the media companies who provide the content. The business's quarterly revenue was up 62.2% compared to the same quarter last year. equities research analysts predict that Snap will post -3.03 EPS for the current fiscal year. But the company's bet on Spectacles has been expensive, costing the company $40 million last quarter for "excess inventory".

Several other brokerages also recently commented on SNAP. That falls short of analysts' forecasts of 21 cents a share loss.

The silver lining in a hard 12-month period for Snap is that it continues to grow both users and revenue despite Facebook's ruthless attempts to demolish it. Facebook's copies have certainly hurt the company, but they have not killed it yet.

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"Our business really came together toward the end of past year", Evan Spiegel, the cofounder and CEO of Snap, said on a conference call with analysts Tuesday.

Snap shares closed the day up more than 1 percent to $14.06.

Still, Snap has a long way to go in its turnaround.

"We executed well on our 2017 plan to improve quality, performance, and automation, which removed friction from our advertising business and improved our application for the Snapchat community". That's still measly compared to Instagram's 100 million new users in the third quarter of 2017, but at least Snap is making some progress.

It will also move many of its headquarters employees to leased facilities in Santa Monica, California, during the first half of the year, Vollero said.

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