Lead by disappointing results, Snap falls 25% on the stock market

by bold-lichterman

  • Snap reported first quarter revenue of $ 149.6 million, well below analysts’ expectations.
  • With 166 million active users at the end of March, Snapchat is struggling to catch up with Instagram Stories and its 200 million active users.
  • After the close of trading, the theoretical price of Snap fell by 25%.

It was the most spectacular IPO of the start of the year. Last March, Snap, the company that publishes the Snapchat app, was valued at $ 24 billion in its IPO, although little information is available regarding its financial performance. It is therefore with impatience that analysts awaited the first public presentation of the company’s results, this Wednesday, May 10.

With sales of $ 149.6 million in the first quarter of 2017, Snap presented results well below the consensus of analysts, who expected revenue of $ 158 million for the period. The company still saw its revenues increase by 286% compared to the first quarter of 2016, as a result of the efforts made over the past year to monetize its audience.

At the same time, the company posted a loss of $ 2.2 billion, partly due to the recognition of costs linked to its IPO. Its cash flow is $ 1.4 billion, and its free cash flow are negative, amounting to -172.9 million dollars.

166 million active users

Beyond this disappointing financial performance, the company founded by Bobby Murphy and Evan Spiegel is also showing weak growth in its user base. Over the first three months of the year, Snap saw its active user base increase by only 5%, reaching 166 million users at the end of March. While this represents an increase of 36% compared to the first quarter of 2016, growth compared to the previous quarter remains weak for analysts. Especially since at the same time, the average revenue per user decreased by 14% compared to the fourth quarter of 2016, from $ 1.05 to $ 0.90.

Following the announcement of these mixed results, the market reaction was not long in coming. While Snap’s stock price remained stable until the NYSE closed, its notional price fell 25% in the evening. Snap’s opening price should therefore be slightly above $ 17.50 per share, an amount close to what it was at the time of its IPO.

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A pivot to hardware

Challenged by Instagram since the launch of its Instagram Stories tool, which surpassed Snap in number of active users for the first time last month with its 200 million active users, Snapchat’s parent company is struggling to maintain its lead.

With the launch of Shows, these very trendy connected glasses, the company seeks to differentiate itself from its main competitor by adding a hardware component to its activity. It now presents itself on its institutional site as a “company specializing in cameras”, proof of the strategic shift that began several months ago.

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Photo credit: Snap