(Reuters) – Snap shares rose 23% on Tuesday after the Snapchat messaging app owner beat projections for user growth and revenue. This happened when more people signed up to chat with friends and family during the coronavirus pandemic.
Daily active users (DAUs), a metric widely used by investors and advertisers, rose 18% year over year to 249 million in the quarter ended September 30, the company said in a statement. According to IBES data from Refinitiv, analysts had expected 244 million.
The company anticipated continued momentum in user growth and forecast around 257 million daily active users for the fourth quarter, beating analysts’ current estimate of 249.81 million.
Revenue, primarily from in-app sales, rose 52% to $ 679 million, well beating analysts’ consensus estimate of $ 555.9 million.
Snap has positioned itself as a safe place for brands to advertise as it focuses on one-on-one messages that disappear when you read them.
That reputation benefited Snap in the third quarter when over 1,000 advertisers boycotted a larger rival Facebook in July in response to hate speech on the platform and saw TikTok as a popular short-form video app the possibility of a US ban over national security concerns.
This opened up an opportunity for Snap as companies reviewed their ad spend and contributed to sales growth, Chief Business Officer Jeremi Gorman said during an earnings meeting with analysts.
According to Debra Aho Williamson, an analyst at eMarketer, Snap has “unique ad offerings such as augmented reality advertising” that have contributed to its performance.
The app was able to expand its user base outside of the US and Europe by working with local telecom providers and building features like photo filters and lenses that are locally relevant, Evan Spiegel, CEO of Snap, said during the earnings call.
Average revenue per user was $ 2.73, up 28% from the year-ago quarter.
Snap’s net loss decreased from $ 227.37 million, or 16 cents per share, to $ 199.8 million, or 14 cents per share.
Snap said sales for the current quarter could increase between 47% and 50% compared to the same period last year, but warned that it was unclear how the pandemic would affect year-end holiday advertising.
Snap rose to $ 35.00 after falling 0.7% at $ 28.45.
Facebook, Twitter and Pinterest stocks also rose after trading closed.
(Reporting by Sheila Dang. Editing by Richard Chang.)
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