Snapchat parent company reports £1.7bn loss in first earnings report

On Wednesday, Snapchat parent company Snap, Inc. posted a huge loss along with a slowdown in its user growth, while its revenue came up short of expectations of Wall Street in its first report for earnings as a public entity.

Snap's shares tumbled 23 percent in after-hours trading on Wednesday to wipe some $6 billion from its market value, a humbling reversal for the company after its red-hot March initial public offering, the biggest for a U.S. tech company since Facebook Inc in 2012.

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.

On Tuesday, May 11, the company posted a $2.2 billion loss in the first quarter, much of which was tied to compensation following the company's IPO in March. Facebook was similar in 2012, with costs of $1.3 billion. Sumitomo Mitsui Asset Management Company LTD bought a new position in shares of Snap during the first quarter valued at approximately $2,119,000. Revenue was at $150 million, which was a 286% rise, but still short of the forecast by $9 million.

Snap's stock fell $5.50, or 24 percent, to $17.48 in after-hours trading. "You are going to introduce your call the next time". It's essentially not a social networking application like Facebook or WhatsApp.

Britton sees challenges for Snapchat's non-messaging features, such as stories and a "discover" option that lets users keep up with news, sports or celebrities.

Many analysts remained sceptical of Snap's long-term prospects.

"At the end of the day, just because Yahoo has a search box, it doesn't mean they're Google", he said, referring to Facebook's new camera feature with augmented reality - which puts the company in direct competition with Snap. This concept was popularized by Snapchat.

Analysts also expressed surprise over Snap's apparent dismissal of the threat from Facebook. If the company wants to expand its user base, it will have to broaden its reach to include older people.

Along with Snap's slow growth, monetization of its user base also troubled investors. So Snapchat can either keep up with the younger generations and "their evolving behaviors and attitudes", or grow up with its original audience as it ages, said Jessica Liu, an analyst at Forrester Research.

  • Zachary Reyes