Snap manages an earnings three-peat and shares are jumping higher

Snap Inc.’s startling turnaround picked up pace Tuesday with a third consecutive quarter of improved results, propelling shares toward their highest level in more than a year.

Few tech stocks have had a better year than Snap SNAP, +4.81%  The stock has catapulted 169% this year through Tuesday’s close while the S&P 500 index SPX, +0.68%  has gained 20% and social media rivals Facebook Inc. FB, +0.02% and Twitter Inc. TWTR, +0.85% are up 54% and 32% in 2019, respectively. Snap shares rose 11% in the extended session Tuesday after the social-media site announced its three-peat, moving closer to the IPO price of $17, which shares have not touched since March of last year.

Snap reported a second-quarter net income loss of $255 million, or 6 cents a share, compared with a 14-cent loss in the year-ago period. Revenue soared 48% to $388 million from $262 million in the year-ago period. Analysts surveyed by FactSet expected a loss of 22 cents a share on revenue of $359 million. Snap offered strong guidance for sales ($410 million to $435 million) and a narrower loss ($60 million to $85 million) during its current third quarter.

The Santa Monica, Calif.-based photo-sharing platform reported 203 million daily-active users (DAUs) in the second quarter, up both year-over-year and sequentially while easily beating FactSet estimates of 191.9 million. Snap expects DAUs to reach between 205 million and 207 million in the third quarter.

It’s been a remarkable comeback for Snap, left for dead by many analysts and investors following a bungled Snapchat redesign and executive exodus last year. Steep increases in revenue and average revenue per user, or ARPU, in the previous two quarters, aided by new content features such as Snap Games and a reconstructed Android app launched earlier this year, have fed the narrative, sending Snap shares up double digits in after-hours trading. Snap’s popular face filters have also helped drive usage and engagement, eMarketer analyst Debra Aho Williamson said in an email.

Another intriguing new feature in testing, Audience Network, could act as a vehicle to “substantially” raise ARPU while extending the reach of Snap’s coveted data for millennials, Beth Kindig, a technology analyst in San Francisco, told MarketWatch in a phone interview. The software development kit lets advertisers use Snapchat data to reach audiences outside of Snap via mobile applications, according to Kindig’s research note from July 15.

For more: With Snap stock up more than 170%, investors are looking for turnaround

The stock bumps and new features have led several analysts to upgrade their outlooks on Snap.

Stifel on Tuesday raised its rating on Snap to Buy. Goldman Sachs analyst Heath Terry, noting “positive trends in user growth and engagement,” hiked his rating on the stock to Buy from Neutral and lifted his price target to $18 from $13 before Tuesday’s results. Similarly, Merrill Lynch’s Justin Post recently raised his price target to $17 from $12 though he maintains a Neutral rating.

Snap ads reached 75% of all 13- to 34-year-olds in the U.S. as of March, offering more reach for advertisers than Instagram for the coveted youth demographic, Snap executives said.

That age range could be an issue for Snap, however, Forrester analyst Jessica Liu told MarketWatch.

“It lacks appeal beyond its core user base and has no visible direction on how to expand or pivot its app beyond the under-35 demographic,” Liu said in an email.

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