Snap user number beats Wall Street estimate, shares soar

Technology

(Reuters) – Snap Inc said the number of people using its Snapchat app would remain at current levels this quarter, easing worries the company would continue to lose users to rival Facebook Inc’s Instagram and sending its shares up more than 20 percent.

FILE PHOTO: A woman stands in front of the logo of Snap Inc. on the floor of the New York Stock Exchange (NYSE) while waiting for Snap Inc. to post their IPO, in New York City, NY, U.S. March 2, 2017. REUTERS/Lucas Jackson/File Photo

The photo-messaging app, known for its disappearing messages and filters that turn people into dogs or even tacos, has struggled since going public in March 2017, as Instagram has replicated many of its novel features. A controversial redesign also alienated some of Snapchat’s advertisers and users.

In the fourth quarter Snap topped Wall Street with 186 million daily active users, flat with the previous quarter and down 1 million from the same period a year ago. Analysts’ average expectation was 184.91 million, according to Refinitiv data.

“We do not foresee a sequential decline in daily active users in Q1 2019,” said Lara Sweet, Snap’s interim chief financial officer, in prepared remarks. She gave no specific outlook on user numbers.

Snap shares jumped 22 percent to $8.62 after hours. That is still less than half the $17 initial public offering price.

The company avoided a third consecutive quarterly decline in users following its redesign, but some questioned the company’s ability to grow.

“Snap’s biggest issue continues to be that it lacks appeal beyond its core user base and has no visible direction on how expand or pivot its app beyond that under-35 demographic,” said Jessica Liu, a marketing analyst at Forrester.

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Snap’s revenue, which it gets from selling advertising on the app, increased 36 percent to $389.8 million, beating Wall Street’s average estimate of $377.52 million.

Snap launched new advertising formats such as unskippable commercials that run on its original shows, which helped double advertising revenue from premium content compared to last year, Snap said. The company has also made it easier for marketers to buy ads on Snapchat.

Average revenue per user was $2.09 during the fourth quarter, up from $1.53 in the year-ago quarter.

The company’s net loss narrowed to $191.67 million, or 14 cents per share, compared with $349.98 million, or 28 cents per share, a year earlier.

Snap was now “substantially closer” to profitability, as it maintains a flat cost structure while increasing revenue, said Chief Executive Evan Spiegel in a statement.

The company has introduced more video content including original scripted shows with the aim of keeping hold of its users.

Snap has also begun rolling out its new Android app to a small percentage of Snapchat users, Spiegel said. Snap has said it rebuilt the Android app because it had more bugs and a worse user experience than its Apple iOS app.

For the first quarter, Snap said it expects revenue of $285 million to $310 million. That compares with the average analyst estimate for revenue of $307 million, according to data from IBES Refinitiv.

Reporting by Sheila Dang; Editing by Bill Rigby

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