Why Snap’s Share Price is Suddenly Popping

Snapchat is back in the game.

The social networking app surprised investors on Tuesday by reporting strong growth in its fourth quarter.

The creator of the disappearing instant message service has disappointed investors for months with poor earnings and a flagging stock price, which has fallen by nearly half since a high of $27, shortly after its initial public offering in March, 2017.

Why is Snap popping?

Although Snap reported a loss of $350 million in the fourth quarter of 2017, its revenue increased 72% to $286 million compared to the fourth quarter of 2016, according to its most recent filing with Securities and Exchange Commission (SEC).

The revenue increase stemmed from strong ad sales, according to reports. Snapchat’s use of self-serve software for advertisers increased ad impressions–or the number of times an ad is viewed–by 575% in the quarter, according to Reuters.

The social networking app surprised investors on Tuesday by reporting strong growth in its fourth quarter.

Snap also reportedly tripled the number of advertisers buying on its automated auction site over the same time period.

Revenue per user, an indication of how much money each customer earns Snap, increased 46% to $1.53, according to the company. And the number of Snap’s daily active users increased 5% to 187 million in the quarter.

News of the good quarter–the first time the company beat analyst expectations since it went public, according to Bloomberg–sent Snap’s shares up about 40%, to $20.67 in late afternoon trading Wednesday. *

Other things to keep in mind:

• At the time of Snap’s IPO, it was one of the most richly valued Internet startups since Facebook, with a market value of $24 billion.
• Back in November, China’s Tencent, the Internet services giant, swooped in and purchased an additional 12% of the company in after hours trading.
• Snap is still not profitable. It reported a net loss of $350 million in the fourth quarter. It reported a total net loss of $3.4 billion for the full year 2017.