Millennials CRUSHED by Snapchat Earnings Fail

Tammy Harvey
May 14, 2017

While Snap's stock dropped 23% by the market's open following its first-ever quarterly earnings report, Facebook's stock dropped about 14%.

The company lost $2.2 billion, but Snap explained that the massive loss was due to stock-based compensation to employees following the IPO.

Snap reported US$150 million in total revenue in the quarter, up 286% from US$39 million a year ago. Yesterday, the company also added a new creativity tool, Magic Eraser, that lets users edit objects from their Snaps before sending. Snapchat earnings for the Q1 and the number of Snapchat users, both are alarming signs that the social media platform needs to buck up.

According to the company, revenue in the quarter ended March 31 was $149.6 million, which was below analysts' expectation of $158 million. "Just because Yahoo! has a search box doesn't mean they're Google".

The slowing rate of growth was in line with an estimate from JPMorgan, which accurately expected 166 million DAUs for the first quarter.

In an interview with CNBC, Snap's chief strategist Imran Khan said, "We made good progress this quarter improving the performance and quality of our Snapchat application, especially on Android, which has helped result in increased net user adds and engagement".

"You have to get comfortable with the fact that people are going to copy you if you make great stuff".

According to its pre-IPO filing with the U.S. Securities and Exchange Commission, Snap reported 161 million daily average users by the end of 2016.

These one-time expenses are nothing to worry about, the company said, although it could be if it doesn't catch up to the competition. That slowdown coincided with Facebook-owned Instagram launching a Snapchat copycat feature.

Vetr upgraded shares of Snap Inc (NYSE:SNAP) from a hold rating to a buy rating in a research report report published on Monday morning.

From a long-term business perspective, Snap Inc. has to come up with ideas to not only expand its user base beyond messaging, but also beyond millennials. Snap's hosting costs per DAU was 60 cents in first quarter compared to 52 cents in fourth quarter and 72 cents in the fourth quarter.

"The connectivity issue is a real problem in the developing world-it changes the use case of how people use Snapchat", said Spiegel.

Following the results, Wall Street was divided among the bulls and the bears, the latter of which seemed to believe that the risks can't be overlooked.

Other reports by Ligue1talk

Discuss This Article