Snap Value Disappears As User Growth Disappoints
Shares of Snap, the parent company of Snapchat, fell over 15% on Tuesday after the company reported disappointing earnings and user growth in the third quarter.
The company’s revenue of $208 million, while a 62% jump from the third quarter of 2016, was well short of the $235.5 million analysts had expected. The company’s number of average daily users grew only 17% to 178 million, which was below the 180.5 million figure that analysts polled by Bloomberg had predicted.
It wasn’t just the user and financial metrics that were disappointing: The earnings report confirmed that Snap’s video-recording glasses, called Spectacles, were something of a flop. The company took a $40 million charge from “excess stock reserves and stock purchase commitment cancellation charges.” In plain English, fewer people bought them than expected.
Snap reported a larger net loss than it did a year ago, losing $443 million, compared with $124 million in its preceding third quarter. The company’s net loss isn’t expanding quarter to quarter, however: It lost around $443 million in the moment quarter.
The poor earnings report is another signpost on the rough road the company has walked since going public in March. Snap has struggled to grow as quickly as it had hoped and to compete against Instagram’s very similar Stories product. Stories, as well as WhatsApp Status, hit the 300 million daily active user milestone earlier this month, Facebook, which owns both services, said.
Evan Spiegel, the cofounder and chief executive of Snap, acknowledged the difficulty some novel users maintain with the app.
“One thing that we maintain heard over the years is that Snapchat is difficult to understand or tough to consume, and our team has been working on responding to this feedback,” Spiegel said in prepared remarks released by the company.
Spiegel said that in response, the company would overhaul its app in a tender to draw in novel users. “We are currently redesigning our application to develop it easier to consume. There is a strong likelihood that the redesign of our application will be disruptive to our commerce, trade in the short term, and we don’t yet know how the behavior of our community will change when they commence to consume our updated application.”
Snap’s shares were originally priced at $17 per share, before skyrocketing to $24 on their first day of trading. But the shares haven’t closed above $20 since June, and in after-hours trading Tuesday, sank to $12.41. The shares closed at $15.12 nowadays before the company reported its earnings.
Matthew Zeitlin is a commerce, trade reporter for BuzzFeed News and is based in novel York. Zeitlin reports on Wall Street and mammoth banks.
Contact Matthew Zeitlin at firstname.lastname@example.org.
Got a confidential tip? Submit it here.