Wall Street finally meets Snapchat's $5 billion man

Owen Stevens
May 12, 2017

Shares in Snap, the company behind social photography app Snapchat, have dropped 20 per cent in value in after-hours trading following the company's first quarterly results since its initial public offering.

The company said it brought in $149.6 million, a 300 percent increase from past year, but well short of Wall Street's $158 million estimates.

Instead, Snapchat reported 166 million daily active users in the latest quarter, an increase of just 8 million. But don't get it twisted, most of that loss was due to $US2 ($3) billion the company had to pay out in stock-based compensation expenses. That's an increase of 36% over year-ago levels but only a 5% gain from the previous quarter. Its overall daily user base increased by 18 percent year-over-year in the first quarter of 2017. The company reported a 47.7 percent rise in users for the fourth quarter and a 62.8 percent jump in the third quarter, according to its IPO filing.

Snap Inc shares plunged as much as 23.5 percent on Thursday after the owner of the wildly popular Snapchat app's user growth and revenue numbers failed to show that it was adequately dealing with rising competition from Facebook.

With Snap's revenue declining sequentially and its user growth decelerating quickly, the company will have to prove to investors that it is going to be able to effectively compete in an environment in which Facebook is quickly launching its own Snapchat-like features across its social networks. As a result, Snap's stocks took a bad beating, pushing shares down by 25 percent by the end of the day.

Analysts surveyed in advance by Yahoo Finance expected Snap to post losses of 19 cents per share on $157.98 million in revenue.

Snapchat's user growth is a key component of its earnings report. The disastrous revenue projections and the dismal growth in the number of users is a reflection of a reality that the company desperately tried to paint with bright colors. The whole Instagram app has about 700 million monthly users.

Is Facebook stifling Snapchat's upside potential?

"Facebook has released a series of Stories-like products throughout the past year, including Instagram Stories, Facebook Stories, WhatsApp Status and Messenger Day".

Not to miss out on the trend, Facebook also launched disappearing stories this year. It is Snapchat which has popularised animated AR selfie masks and facial filters.

Other reports by VgToday

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