Thursday, 19 October, 2017

Snapchat's owner publishes its latest chapter of troubling financial results

Snap Inc pulls an amazing revenue streak but losses quadruple Snapchat's owner publishes its latest chapter of troubling financial results
June Sullivan | 12 August, 2017, 00:31

It offers Snapchat, a camera application that helps people to communicate through short videos and images.

Snap Inc. was reeling on Friday morning after posting its second straight underwhelming quarterly report, and nobody is feeling the pain more than CEO Evan Spiegel and Chief Tech Officer Bobby Murphy.

Snap reported daily active users and second-quarter revenue below analyst forecasts, sending shares down to US$12.

Snapchat isn't growing into other markets and Spiegel has justified this by stating that the cost of growing into these new markets and supporting the new users would be much higher than what could be made from them in ad revenue. A measure of revenue that Snapchat generates from each user was flat compared with the figure in the fourth quarter of 2016. On a GAAP basis, Snap is expected to post a loss of $359 million. "DAUs increased 7.3 million or four per cent quarter-over-quarter from 166 million in Q1 2017", Snap said in a statement. Snap shares have sunk since its initial public offering four months ago that priced shares at 17.

The anemic growth renews investor concerns that the messaging platform is struggling to grow into a mainstream service in the face of fierce competition from Facebook.

Opening the door to more volatility, Snap employees on Monday will be permitted to sell shares for the first time since the IPO, in the second expiration of restrictions on sales by certain shareholders. While any rise is good, the 173 million total users still doesn't surpassed the 250 million daily active users on Instagram Stories, which celebrated its first birthday last Wednesday. Piper Jaffray Companies reissued a "neutral" rating and issued a $16.50 price objective (down from $20.00) on shares of Snap in a research note on Thursday, July 13th.

It also is an indication that Snap's growth is slowing. Investors have been anxious about the volatility of the stock, with a post-IPO ban on employees selling shares expiring on Monday.

Several other research firms have also issued reports on SNAP.

"100 percent of the problems that we are seeing at Snapchat are self-inflicted", James Cakmak, an analyst with Monness Crespi Hardt and Co., told Bloomberg.

NN Investment Partners Holdings N.V. increased its stake in Snap Inc. Raymond James Financial, Inc. initiated coverage on Snap in a research report on Tuesday, April 25th. An analyst asked Spiegel to specifically explain the so-called growth-hacking techniques - things like sending lots of push notifications that are created to boost app usage - he opposes. Google is reportedly working on Stamp, which The Wall Street Journal compared to Snapchat's Discover feature for letting people find photo and video-heavy news items. Spiegel gave a non-answer, and the analyst was heard laughing and saying, "I didn't even understand his response" before his call was cut off.

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