Snap surges 24 percent after user growth bounce

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(Reuters) – Shares of Snapchat owner Snap Inc (SNAP.N) rose as much as 24 percent in premarket on Wednesday after the company beat expectations for fourth quarter revenue and reported an acceleration in growth of active users for the first time as a public company.

Snap shares have almost halved in value since its much-hyped initial public offering in March of last year, hurt by falling user engagement and growth, and doubts over whether it could compete with social media majors like Facebook (FB.O).

Tuesday’s results showed that customers were staying longer on the Android version of its app, after software bugs were fixed, and advertisers were taking to an auction-based advertising system that made it cheaper and easier to buy ads.

Shares of the company were up 22 percent at $17.16 by 7 a.m. in New York (1200 GMT).

“The auction transition for Snap Ads is largely behind us, and the number of advertisers is doubling year over year – so ad pricing has a LOT of upside ahead,” said RBC analyst Mark Mahaney.

Those gains also came in a jittery start for Wall Street on Wednesday after three days in which stock market volatility has surged.

Daily active users rose 18 percent to 187 million at a single digit rate, from a year earlier, reversing a trend of slowing growth.

“With some improvement in user growth and further automation of sales of Snap ads, we think the firm is slowly making headway toward providing a scalable and easily measurable platform,” Morningstar analyst Ali Mogharabi said.

However, some were still cautious about whether the company was clearly on a sustainable growth path.

“A good quarter doesn’t change our fundamental view that Snap has its work cut out to continue to deserve a premium multiple,” said Jefferies analyst Brent Thill.

Reporting by Sonam Rai and Laharee Chatterjee in Bengaluru; editing by Patrick Graham

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