Snap has not snapped back.
The social media company reported worse-than-expected quarterly results on Thursday, with a loss that was steeper than expected and revenue that missed estimates, as it added fewer users than Wall Street anticipated.
Snap added 7 million daily users during the quarter — a slower rate than the 8 million added in the first quarter. Shares whipsawed after hours, falling 12 percent in choppy trading.
- Adjusted EPS: Loss of 16 cents per share vs. loss of 14 cents per share expected by a Thomson Reuters consensus estimate
- Revenue: $181.7 million vs. $186.2 million expected by a Thomson Reuters consensus estimate
- Daily active users (DAUs): 173 million vs. 175.2 million expected by a StreetAccount estimate
- Average revenue per user (ARPU): $1.05 vs $1.07 expected by FactSet
Snap’s second-ever quarterly report as a public company came at a crucial time for the ephemeral messaging app.
The company went public in March amid a dearth of IPOs, and was well-received at first: Shares jumped 44 percent on the first trading day. But Wall Street analysts, including IPO underwriter Morgan Stanley, have gradually lowered the expectations. Shares have been under pressure, falling about 41 percent over the past three months.
Despite reporting double-digit growth in daily users and triple-digit growth in revenue per user on Thursday, Snap has struggled to meet the high bar of constant growth that’s been expected of Silicon Valley companies like Facebook.
About 173 million people open Snapchat’s app each day worldwide, a 21 percent increase from a year ago. And average revenue per user rose 109 percent from this time last year, the company said on Thursday.
But compared to the first three months of the year, the growth seems less dramatic: DAUs grew 4 percent quarter-over-quarter, and ARPU grew 16 percent. The company saw a surge of ARPU growth in Europe and the rest of the world, but the increase in North America was more muted.
Losses also piled up during the quarter. In the three months ending in June, Snap posted a loss of $443.1 million, as costs rose across the board, especially in marketing, R&D and operations. The company — a huge patron of Google Cloud — did save money in hosting costs thanks to more efficient infrastructure.
Snap makes money from advertising, like short video clips and sponsored augmented reality filters. Digital advertising has become a challenging area to monetize, dominated by Facebook and Google — so a growing pool of users means there’s a growing number of eyeballs that will see ads and return money to investors.
As Snap has struggled to buoy a falling share price over the quarter, competitors have caught up. Multiple agencies have told CNBC that interest in Snapchat among advertisers is flat to declining as many influencers and creative agencies look to Facebook’s Instagram. Google is also in talks to create a quick-loading media platform similar to Snapchat’s Discover, according to The Wall Street Journal. And with most of its user base on iOS (at least as of earlier this year), Snap is also beholden to Apple, which has its own augmented reality ambitions.
Still, while Snap may be small, it boasts high engagement among the coveted millennial age group. Martin Sorrell, head of advertising giant WPP, told CNBC this month that his company plans to double its spending on Snap this year.
— CNBC’s Michelle Castillo contributed to this report.
Disclosure: CNBC parent NBCUniversal is an investor in Snap.
Source: Tech CNBC
Snap shares tumble in volatile trade after another quarter of disappointing user growth