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Snap's stock rallies as Instagram reportedly shutters messaging app

Javier E. David
Editor focused on markets and the economy

Snap Inc’s (SNAP) stock surged on Thursday, boosted by a report that Instagram was killing off a messaging application that was poised to compete against its platform.

The parent company of Snapchat saw its shares leap by more than 7% intraday, after it was revealed that Instagram — owned by Facebook (FB) — was shuttering Direct, a standalone app designed to facilitate private messages between users.

Instead, Facebook plans to consolidate direct messages into the Instagram app itself, according to a statement from Instagram, confirming news first published by Techcrunch.

“We're rolling back the test of the standalone Direct app,” Instagram said in a statement. “We're focused on continuing to make Instagram Direct the best place for fun conversations with your friends.”

Investors responded by bidding up Snap’s stock, in apparent relief that the photo and video sharing platform wouldn’t have to fend off another competitor. Snap’s stock, traded on the New York Stock Exchange, rose as high as $11.53 in afternoon dealings on Thursday.

Instagram’s popularity has skyrocketed, largely at Snapchat’s expense, by appropriating many of the latter’s features and bleeding off many of its users. However, Snapchat’s been slowly winning back previously wayward fans, with its most recent quarterly earnings showing daily active users rose to 190 million.

Snap’s recent release of a revamped app for Android users places it “in a better position to address user demand across the globe,” Credit Suisse said in a research note. The firm rates the stock at Outperform, with a price target of $13.

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