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Snap’s 180% Surge Aided by More Teens Loving Augmented Reality

Snap has been quietly doubling down on the fun, teen-focused features that helped build its audience to begin with. 

Snap’s 180% Surge Aided by More Teens Loving Augmented Reality
An employee demonstrates how to use Snapchat Spectacles by Snap Inc. to a customer at the company’s pop-up store in the Venice neighborhood of Los Angeles, California, U.S. (Photographer: Patrick T. Fallon/Bloomberg)

(Bloomberg) -- Business is once again booming for Snap Inc., and the stock’s more than 180% surge since a December low may uncover a path to regain the social dominance it once had among teenagers.

From a growth in users to augmented reality driving engagement, Pivotal Research Group’s Michael Levine says there are "increasing signs of momentum in the business on multiple fronts." The equity research firm upgraded Snap to buy from hold on Thursday, and raised its price target to $17.25 a share from $13.25.

Still "there is a healthy amount of remaining skepticism about the business among investors," Levine admits, but "a turn in usage and revenues could translate into a meaningful re-rating higher." Snap shares rose more than 9% intraday, touching the highest since last July.

Snap’s 180% Surge Aided by More Teens Loving Augmented Reality

Playing to Its Core

While other platforms like Facebook Inc. have spent the year haggling with regulators and privacy hawks, Snap has been quietly doubling down on the fun, teen-focused features that helped build its audience to begin with.

At its first developer conference in April, Snap rolled out a games platform and new augmented reality features that let users add graphics to their hands, feet or bodies. Snapchat still has popular face-distorting lenses, too, and continues to come up with bizarre ideas. One of the newer, more widely-discussed options: A gender-swap lens that makes men look like women, and women look like men.

"The latest launch of lenses is among some of the most impressive product innovation we have seen in some time from the company," according to Levine. "This in our opinion constitutes real innovation in augmented reality," he said.

Snap’s increasing operational efficiency -- coupled with a more than 30% growth in sales -- is helping to narrow Ebitda losses as management hopes to break even by year-end, says Jitendra Waral, a Bloomberg Intelligence technology analyst, in an early June note.

To contact the reporters on this story: Kamaron Leach in New York at kleach6@bloomberg.net;Kurt Wagner in San Francisco at kwagner71@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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