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Why Snap Stock Climbed 17.5% in July

By Keith Noonan – Aug 7, 2019 at 6:16AM

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After a challenging 2018, Snap stock has nearly tripled this year.

What happened

Shares of Snap (SNAP -1.34%) gained 17.5% in July, according to data from S&P Global Market Intelligence. The social media company reported second-quarter results on July 23, and its better-than-expected results helped the stock post another month of double-digit gains.

SNAP Chart

SNAP data by YCharts.

Snap's second-quarter revenue increased 48% year over year to reach $388 million and top the average analyst target for $359 million in revenue. The company posted a $0.06 loss per share for the period, which also came in significantly better than the average analyst estimate's call for a loss of $0.10 per share. Its net loss for the period was $255 million, an improvement of $98 million compared to the second quarter of 2018.

A woman holding a mobile phone.

Image source: Getty Images.

So what

The company's daily active users (DAUs) hit 203 million, increasing 8% year over year and marking the company's second consecutive quarter of DAU growth. Figuring out how to generate user growth was Snap's biggest challenge in 2018, and difficulties on that front were the primary cause of its weak stock performance. Snapchat is making progress with DAUs and engagement, and Snap stock has been on a tear in 2019 as a result.

The company's redesign of Snapchat on Android appears to have been successful, with management noting that users had increased the number of messages by 7% on the majority of Android-based devices and that there has been a 10% increase in the retention rate for people who open Snapchat for the first time. 

Now what

Snap shares have dipped a bit in August, with the stock trading down roughly 3% in the month so far.

SNAP Chart

SNAP data by YCharts.

Snap recently announced that it would be raising $1.1 billion in funds through the sale of convertible senior bond notes that will mature in 2026 and indicated that the funds would be used for general corporate purposes and potential acquisitions and stock buybacks.

Snap is still a long way from achieving profitability, and making smart acquisitions could play a big role in boosting its media and content ecosystem and moving the business closer to getting into the black. Investors should continue to monitor engagement metrics and attempt to gauge user reception to the company's original video and game content offerings. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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