Snapchat stock pops despite drop of 3 million users

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Prince Alwaleed bin Talal, the Saudi investor, disclosed a $250 million stake in Snap last night as the company reported an unexpected decline in users of its Snapchat app.

On the upside, the company reported second quarter revenues of $262.3m against analyst estimates of $249.8m, up 44% over the same period a year ago, and a loss of $0.14 earnings per share against a loss estimate of $0.18.

The overhaul of the once fast-growing app turned some users away, and more people are flocking to Facebook Inc.'s Instagram, which has successfully copied Snap's most popular features. Losses, adjusted for stock option expense and amortization costs, came to 14 cents per share.

On Thursday, the businessman announced a $267 million deal to buy newly issued shares in the Dutch music streaming service Deezer through his Kingdom Holding investment company and Rotana Group, the entertainment company he also owns.

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The social network has reported that for the first time it has started losing users who log in once a day.

Despite the fall in the number of users, the firm said revenues were up and its losses had declined in its second quarter.

Snap has been working to convince big advertisers to spend more of their budgets on Snapchat ads and reach the app's base of mainly 18-34-year-old users, and it beat analyst revenue forecasts as it drew in more worldwide and small business advertisers.

Snap said Tuesday that third-quarter revenue would be $265 million to $290 million.

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His investment comes about three years after he met Snap chief executive Evan Spiegel and chief strategy officer Imran Khan, when the two executives visited Saudi capital Riyadh.

"It's always going to be a niche platform, so the modest change isn't very remarkable", said Pivotal Research's Brian Wieser.

Snapchat's revenue climbed 44% year over year even as it lost users in the last quarter because of a rocky app redesign and increased competition from rivals.

The prince had previously been rumoured to be interested in investing in Snap prior to its IPO, though in 2015 a source told Reuters there were "no plans to invest".

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Skepticism heading into Snap's better-than-expected results was highlighted by Wall Street's reaction to Snap's five quarterly reports since its March 2017 initial public offering: Shares responded positively only once.