Snap Inc. (SNAP - Get Report) shares surged the most in nearly six months Wednesday after the messaging app maker posted a narrower-than-expected second quarter loss and surprised investors with solid user growth thanks to its new suite of augmented lenses and a re-tooled android platform.
Snap said its adjusted loss for the three months ended in June came in at 6 cent per share, a notable improvement from the 27 cents per share loss it tallied last year and firmly ahead of the Street consensus of 10 cents per share. Group revenues, Snap said, rose 48% to $388 million, again topping analysts' forecasts, as advertizing sales rose amid the user gains.
Snap said daily active users on its signature Snapchat app rose 8% from last year to 203 million, while the average revenue per user jumped 36% to $1.91 each, as the augmented lenses, which allow users to change their facial images, gain popularity in key markets around the world.
"We recently launched the next generation of AR Lenses, which leverage our experience with the mobile camera as well as our ongoing investment in research and innovation," CEO Evan Spiegel told investors on a conference call late Tuesday. "These new Lenses use deep neural networks to modify a person's appearance in real time, and we're well received by our community with over 200 million people playing with these new Lenses in the first 2 weeks."
"We continue to invest in Lens Studio, our desktop application for creating augmented reality experiences," Spiegel added. "With Lens Studio, we're making the AR creation process easier while simultaneously providing more sophisticated tools in order to unlock the creativity of our community."
Snap shares were marked 14.13% higher Wednesday, the biggest single-day gain since February 6, to change hands at $16.95 each, the highest since March of last year and a move that would extend the stock's year-to-date gain past 200%.
"The launch of both new AR lenses and the new Android application drove (daily active users) to 203M, well ahead of both our estimates and consensus of 192M and marking the highest net (daily active user) adds in three years," said Canaccord Genuity analyst Maria Ripps. "We find these developments encouraging and suspect they can continue for a couple of quarters. However, given the specificity of this quarter's (daily active user) growth drivers, tougher user growth comps starting in Q4, and a valuation which already reflects a lot of operational improvements, we remain at a HOLD rating for now."