According to the news report by CNN, the shares of Snap Inc. went up by more than 10% in late trading on Tuesday, April 23, after it showed good results in its earnings report. However, the company’s shares lost most of those gains later.
Snap stated that its messaging app, Snapchat had registered 190 million daily active users in the first 3 months of 2019, which is an increase from the 186 million daily active users that company had reported for the previous quarter.
This performance was better than market expectations, and is the first time in the last one year that the company’s user-count grew sequentially. The market expectation was that Snap would only see 2 million net additions.
The company also stated that its revenue for the quarter shot up by 39% at $390 million. This figure also beat investors’ expectations.
In the earnings call, the Chief Executive Officer of Snap Evan Spiegel said that Snapchat’s move to self-serve advertising products as well as its appeal to a younger audience is what drove up numbers.
This quarter’s performance results could help Snap in its narrative in showing that it was turning its business around. In February this year, the company stated that its user base had finally stopped shrinking.
In fact, according to MarketWatch, Snap’s stocks have jumped up by 118% so far this year, vis-à-vis the S&P 500, which has gained 17% in the same time period.
Snap also stated that it had finished the rollout of its new Android Snapchat app, which would be critical to the growth of its user base. The company said that the new app opened 20% faster than the old one and would give users a better experience, even if they had lower-end smartphones.
Prior to the rollout of the new app, users had complained that the Snapchat app would crash and it also had poor camera quality.
Principal analyst at eMarketer, Debra Aho Williamson stated that the redesigned Android app could help drive further gains in the coming quarters if a larger number of people began using this version of Snapchat. She said that a significant percentage of the world’s smartphone using popular used Android.
However, Spiegel also noted that the company would need to work hard to regain the Android user base it lost due to bad experiences with the old app. He said that it would take the company some time to rebuild their users’ trust, and that the best way they could do so would be to deliver on their product. The CEO said that this was going to be a process.
Analysts in general have been more optimistic about Snap’s performance in recent months. After visiting the company’s headquarters in Santa Monica, Jefferies analysts felt that Snap had evolved from being just a startup to a more mature company.
The shift in market sentiment towards the company is remarkable. Just last year, Snap was struggling with a negative reaction to the redesign of its Snapchat iOS app, and it faced its first-ever drop in daily active users. Added to that, the company saw several executives leave and competition from Instagram made things even more difficult.
Despite its progress in the right direction this year, the company still faces challenges ahead. Snap had losses of $130 million for this year’s first quarter. And while this is a 20% improvement from the losses the company saw at the same time last year, when it lost $385 million, the company still has to go a long way before it stops recording losses.