Snap Posts Record Growth

After a tumultuous public debut, the state of Snap in 2019 is slowly improving and Wall Street is responding. The social media messaging company is up nearly 12% after-hours following a beat on Q2 earnings, announcing $388 million in revenue versus the the Zacks consensus estimate of $358.5 million, and a loss of $0.06 EPS versus an expected $0.10 loss. The financials were better than expected, but the real surprise was the healthy user growth.

Snap said they had hit 203 million daily active users (up 8% year-over-year), while that had only been expected to reach 191.7 million. The company announced they had 190 million DAUs last quarter and, despite the year-over-year decrease, the stock had a strong rebound as investors expressed a renewed faith in the company’s ability to bring new users onto the platform.

“The growth in our community, engagement, and revenue is the result of several transitions we completed over the past 18 months,” said Snap CEO Evan Spiegel in a statement. “We look forward to building on our momentum and making significant ongoing progress in each of these areas.”

The company said it expects third-quarter revenue of $410 million to $435 million, which is better than analysts expected. Snap also said it expects between 205 and 207 million daily users for the third quarter, ahead of the 195.5 million analysts expected, according to FactSet. Snap’s turnaround has been driven by CEO Evan Spiegel’s decision to stop trying to attract all users and instead focus on the company’s core base of younger consumers. Advertisers have flocked to Snap largely because of its augmented reality technology, which has led to improved engagement with users by letting them experiment with selfies and group photos.

In 2019, Snap replicated the past success of its puppy face and rainbow lenses with a gender swap lens that showed users what they’d look like as a person of the opposite sex and a baby face lens that showed them as babies. “The popularity of these Lenses drew millions of people into our rebuilt Android application, where they experienced the new and improved Snapchat that led to increased engagement,” Spiegel said in his prepared remarks to investors. “The enhancements we have made to our advertising business and self-serve platform meant that we were better able to monetize this increased engagement, leading to accelerating revenue growth.”

Todd “Bubba” Horwitz