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Snapchat stock soars 20% after ending losing streak

09 February 2018

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.

"This quarter was a major step in the right direction for the company", said Daniel Ives, an analyst with GBH Insights. In the final months of 2017, the company addressed both of these issues far quicker than analysts and its many bears had expected.

The main reason given by the company for the stellar revenue numbers was the fact that daily active users have risen dramatically since the previous quarter.

During Q3 of 2017, Snap announced that it was redesigning its Snapchat app to reel in new users and explore fresh methods of monetisation, with changes beginning in November 2017.

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Year-over-year, DAUs increased 28.8 million - or 18% - during the quarter ended December 31. Additionally, the fourth quarter saw significantly more new Android users as a percentage of net additional users than any other quarter in our history. Snap has a 12 month low of $11.28 and a 12 month high of $29.44.

Nearly all of Snap Inc.'s revenue comes from mobile advertising on the photo-sharing app.

Snap reported a net loss of $350 million or $0.28 per share, up from analyst expectations of a $410 million loss.

Snapchat shares opened up 24.12% to $17.44.

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The earnings report was published after the market closed, and the stock price crashes into $19.52 in morning trading at New York Stocks Exchange (NYSE), the highest it has been since last June 2017.

After struggling to grow its audience throughout the year, Snap unveiled a significant redesign in November meant to make its messaging service less confusing for users.

To grow its ad revenue, Snap has been slowly shifting toward a self-serve ad buying software that operates as an auction, much like rivals Facebook Inc. and Alphabet Inc.On the earnings call, executives said clients bought 90% of the company's inventory via this new tool, up from 10% of ads in the year-earlier period. It was Snap's fourth quarterly earnings as a public company. First Manhattan Co. now owns 7,631 shares of the company's stock valued at $110,000 after buying an additional 6,056 shares in the last quarter.

Looking ahead to this year, Snap is predicted to generate $1.47bn in worldwide ad revenue - up considerably on the $825m achieved in 2017 - according to eMarketer estimates. More importantly, we increased advertising impressions by over 4x year-over-year while continuing to grow per user engagement.

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"A good quarter doesn't change our fundamental view that Snap has its work cut out to continue to deserve a premium multiple", Jefferies analyst Brent Thill said. However, in order to keep growing their user base, Snapchat needs to make sure they maintain the quality and relevance of their content, especially as they try to size up to Instagram.

Snapchat stock soars 20% after ending losing streak