Snapchat's Growth Stalls in Facebook's Shadow in 1Q Report

With the bad news, Snap's stock is TANKING.

Snap Inc (NYSE:SNAP)'s stock had its "buy" rating reissued by stock analysts at Goldman Sachs Group Inc in a report issued on Thursday.

On Tuesday, the company posted a $2.2 billion loss in the first quarter, much of which was tied to compensation following the companys IPO in March.

It's not unusual for tech startups to post many years of losses as they build market share and recoup their initial investments.

Although revenue for Snap was close to quadrupled during the quarter, it rose to only $150 million and was short of what analysts on Wall Street estimated of $158 million. "So far, Instagram Stories is believed to have detracted the most from Snapchat's existing user base, but Facebook Stories also appears to be gaining ground".

"Over the past year, Snapchat has steadily introduced ad capabilities and tools that are similar to those offered by leading sellers of mobile ads, including Facebook and Google", eMarketer reported.

Similarly, average revenue per user (ARPU) was $0.90 in the first quarter, an increase of 181% over the same period a year ago when these revenues were $0.32.

In early March, Snap CEO Evan Spiegel received a hefty stock bonus worth about $750 million on completion of the company's initial public offering. The co-founders Evan Spiegel and Bobby Murphy each lost more than $1 billion. That could be a plausible explanation for Snapchat's own slow user growth over the Jan-Mar quarter.

Snap IPOed in March, which raised $3.4 billion and propelled the company to a $24 billion valuation. "To their credit", he added, "they did guide towards a number that would be lower, which it was". He said the figure was surely "eye popping".

Growth struggles, including lower-than-expected active user volume, marked Snap's first quarter as a public company.

Snap receives some revenue from branded or sponsored filters and lenses, but depends on advertising dollars for the bulk of its overall revenue. This is two million less than expected but a 36% increase year on year.

It wasn't the day Snap Inc - the parent company of Snapchat - had planned. During an earnings call with financial analysts Wednesday, the CEO said that despite what might look like troubling numbers, he's pleased with how the company is performing, noting that revenue is up 286% from this time previous year, and daily active users are up 36%, although that growth is decelerating quickly.

Latest News