Snap share value drops 20% after its first earnings report

On Wednesday, Snap Inc. announced a massive loss and a continued slowdown in user growth, while revenue fell below Wall Street's expectations in its first earnings report as a public company. The result was impacted by a US$2 billion share-based expense related to the company's IPO, which held its initial public offering (IPO) in March. Even without that one-time cost, however, Snap's loss doubled from the same quarter a year earlier. Its user numbers also came in light.

Average revenue per user (ARPU) was 90 cents in the first quarter, up from 33 cents the same quarter a year earlier, but below the $1.05 per user in the fourth quarter of 2016. The company's shares fell more than 20% in after-hours trading in NY. Co-founder and chief executive Evan Spiegel received a $750 million bonus for taking the company public.

With the bad news, Snap's stock is TANKING.

Most of the company's losses went in compensation to Snap's staff after the IPO.

It is also registered an increase of 36 per cent on the 122 million daily users the app had this time a year ago.

Is Facebook stifling Snapchat's upside potential?

The slow user growth is not an insurmountable obstacle for Snapchat, but one thing is certain: any "inorganic" growth they exhibit will most likely be shadowed by Facebook, including acquiring other apps with key stand-out features. Since it couldnt buy its smaller rival, Facebook is bent on copying Snap to death.

To compensate for the lacklustre user growth, Snap pointed out that more than 3 billion daily snaps were created in order to underscore how actively engaged its user base is.

At its recently concluded F8 developer conference in San Jose in the US, CEO Mark Zuckerberg launched "Camera Effects Platform" to encourage augmented reality (AR) effects. "But I do think at this point, we're pretty much ahead in terms of the technology that we're building".

"If you want to be a creative company, you've got to get comfortable with and enjoy the fact that people are going to copy your product if you make great stuff", he said. In the "Rest of World" region, it added just one million users to reach 40 million DAUs. A five per cent increase in new daily active users isn't the kind of growth investors were looking for. The company generated most of its revenues from advertising, but brought in $8.3m from elsewhere, largely driven by its Spectacles smartglasses. This quickly became evident during Snap Inc.'s first earnings call as the company's uninspiring performance led droves of investors to abandon ship. Facebook was driven down by investor doubts about its ability to make money from mobile devices.

  • Zachary Reyes