Snap Inc surprised Wall Street on Tuesday with a rebound in user growth for its Snapchat messaging app, showing resilience amid competition with Facebook Inc's Instagram and sending shares up almost 30 percent.
Analysts were expecting the company to add 6 million users during the fourth quarter.
In addition, quarterly revenue of $253 million would bring its full-year revenue to $793 million.
Snap's shares soared more than 25 per cent in after-hours trading, reaching $17.61. Earnings per share were -$0.13, beating estimates by three cents.
Almost a year after Snap's March IPO, analysts and investors have been watching to see if Snap can boost user growth amid competition from larger rival Instagram, which has added photo filters and other Snapchat-mimicking features.
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Snap generated some $285.69 million in revenue during the quarter ending December 31, compared to $165.68 million during the same quarter a year before.
Larger social-media rival Facebook Inc. has copied some of Snapchat's most-popular features for bigger audiences, while a dramatic redesign of the Snapchat app is rolling out slowly - and to lackluster reviews so far.
Snap's shares dropped 14% the day after it gave a disappointing third-quarter report.
Analysts at Raymond James predict Snap's stock-based compensation this year will be $900 million, with the number falling to $850 million in 2019. This represented 4.5 million new DAUs, or growth of about 17% year-over-year, but just 3% sequential growth. Finally, Cowen lowered Snap from a "market perform" rating to an "underperform" rating and dropped their target price for the stock from $12.00 to $11.00 in a research report on Thursday, January 4th. CEO Evan Spiegel said in a conference call Tuesday that the company is "pleased with the initial results" and the redesign will be available to all Snapchat users in the first quarter.
That re-design, separating friends from brands, was launched in late November, but has yet to roll out to all users. He also cited improvements to the company's Android app as part of the reason DAU numbers have risen, saying "people who try Snapchat on Android are much more likely to stick around and become Daily Active Users".