Snap's (NYSE:SNAP) stock soared nearly 40% on April 22 after the social media company posted impressive first-quarter numbers. Snap's revenue rose 44% annually to $462 million, beating expectations by $42 million, as its net loss narrowed from $310 million to $306 million.

Its adjusted EBITDA loss narrowed from $123 million to $81 million, or a non-GAAP net loss of $0.08 per share, which matched analysts' expectations. Do those growth rates indicate it's finally safe to buy Snap's stock, which finally reclaimed its IPO price of $17 after its latest rally?

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Image source: Getty Images.

Another quarter of accelerating user growth

Snapchat's daily active users (DAUs) rose 20% annually to 229 million in the first quarter, marking its fourth straight quarter of accelerating DAU growth.

DAU growth

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Sequential

2%

7%

3%

4%

5%

Annual

(1%)

8%

13%

17%

20%

Source: Snap Q1 2020 report.

Its DAU growth accelerated across both iOS and Android devices, as well as all three of its global regions, which indicates it's holding up well against fierce rivals like Facebook's (NASDAQ:FB) Instagram and ByteDance's TikTok.

Region

DAUs (Q1 2020)

Sequential growth

Annual growth

North America

88 million

2%

10%

Europe

70 million

4%

14%

Rest of World

71 million

11%

45%

Source: Snap Q1 2020 report.

During the conference call, CFO Derek Andersen stated: "We believe the accelerating growth of our community and an increasingly competitive market for attention on mobile clearly demonstrates the value of our differentiated platform."

Rising average revenue per user

Snap's average revenue per user (ARPU) rose 20% annually to $2.02 during the quarter, which marked a slight deceleration from its 23% growth in the fourth quarter. Its ARPU declined sequentially across all regions -- but that decline was largely expected, due to seasonally higher ad spending during the holiday quarter.

Region

ARPU (Q1 2020)

Sequential growth

Annual growth

North America

$3.57

(19%)

27%

Europe

$1.09

(20%)

41%

Rest of World

$1.00

(26%)

3%

Total

$2.02

(22%)

20%

Source: Snap Q1 2020 report.

Snap's rising ARPU can be attributed to the expansion of its ecosystem with new lenses, Discover videos, and games, all of which keep users engaged for longer periods. Snap stated its users created an average of 4 billion Snaps per day -- which equals 17 Snaps per daily active user.

The total time spent by Snapchatters watching its Discover content rose 35% annually during the quarter, as the total daily time spent watching Shows more than doubled. Over 60 of its shows reached a monthly audience of over 10 million viewers during the quarter, up from 50 shows in the fourth quarter.

But what about the COVID-19 pandemic?

Snap's growth over the past year has been impressive, but its growth should decelerate in the second quarter as companies buy fewer ads during the COVID-19 crisis.

Since the start of the second quarter, Snap estimates its revenue rose 15% annually from April 1 to April 19, but decelerated to 11% growth over the past week. Andersen noted it wasn't clear how Snap's "growth rates may evolve" throughout the crisis, as macro headwinds hurt its advertisers, but it remained "cautiously optimistic that trends could improve over time if conditions begin to normalize."

Snap didn't offer any revenue or adjusted EBITDA guidance for the second quarter, but it still expects its DAUs to grow 18% annually to 239 million. It attributes the slight deceleration to a tough comparison to the second quarter of 2019, when it gained more users with the launch of new AR lenses.

Snap's outlook was comparable to Facebook's. In late March, Facebook warned that the pandemic was throttling ad spending but boosting engagement rates on Messenger, Instagram, WhatsApp, and Facebook Live. In other words, the pandemic could temporarily reduce ad purchases, but social networks with sticky ecosystems should keep gaining users and set the foundations for faster recoveries.

Is it the right time to buy Snap?

Snap's deceleration might continue throughout the second quarter, but investors should recall that its top ten advertisers are mainly massive companies like ByteDance, Coca-Cola, Comcast, and Disney.

These companies might temporarily buy fewer ads, but their spending will likely stabilize and rebound after the pandemic ends. Therefore, Snap's ad business might hit a few speed bumps in the second quarter, but it could recover in the second half of the year.

Snap's stock still isn't cheap at 12 times this year's estimated sales, but I believe its growing user base, rising ARPU, and expanding ecosystem indicate it still has plenty of room to run. I previously told investors it was wise to accumulate shares of Snap at or below its IPO price, and I still stand by that assessment.