The owner of Snapchat added fewer daily users than expected. A performance that discouraged investors and drove stocks to levels close to the IPO.
Investors are disappointed with Snap. The owner of the Snapchat application attracted fewer users than anticipated in the first quarter of this year, a result that drove stocks to plummet more than 20 percent. For investors, it’s a sign that it can be difficult for the young company to increase its audience and compete with Facebook.
This sharp decline comes after Snap announced that it added eight million active users daily in the first three months of this year to a total of 166 million – analysts surveyed by Bloomberg predicted an additional 168 million users. This represents a slowdown of 36% compared to the same period last year.
Snap Inc. reported a net loss of US$2.21 billion in the first quarter, versus losses of $ 104.6 million in the same period of 2016. 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.
The revenues also fell short of analysts’ projections. The company’s revenue totaled US$149.6 million in the first three months of the year, up 286% year-on-year. However, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were negative at US$188.2 million, doubling losses of US$93.2 million a year earlier.
The disappointment around the results drove the company’s shares to drop 21 percent to $18.15 per share. They are, therefore, increasingly close to the $17 defined in the initial public offering (IPO). The social network’s holding company of images and videos that disappear will, with this operation, lead the largest inflow of the last three years and one of the largest in the last decade.
Rob Sanderson, an analyst at MKM Partners, says investors are worried that unless [the company] quickly starts adding users, Snap’s ability to sell more advertising will stabilize at some point.