Tuesday, 17 October, 2017

Snap poised to close at record low following earnings miss

US-IT-LIFESTYLE-IPO-SNAP-UNICORNS Snapchat's parent company was valued at more than $30bn in its IPO in March
Wilma Wheeler | 12 August, 2017, 00:35

The Snapchat parent said its second quarter loss nearly quadrupled as revenue growth slowed and it added fewer new users, hurt by competition from social media giant Facebook (FB).

Investors did seem to find Snap's losses meaningful enough to drive shares lower in late trading Thursday. The business had revenue of $181.70 million during the quarter, compared to the consensus estimate of $186.49 million. Cantor Fitzgerald raised shares of Snap from an "underweight" rating to a "neutral" rating and cut their target price for the company from $18.00 to $17.00 in a report on Thursday, May 11th. Yet rival Facebook has been successfully copying some of Snap's key features on its larger social-media properties, drawing away users that might otherwise have downloaded Snapchat.

Its losses for the quarter ballooned to $443 million, a almost fourfold increase from the same period a year earlier and worse than investors had expected. On average, analysts anticipate that Snap Inc. will post ($0.56) earnings per share for the current fiscal year.

Salvatore Recco, executive vice president at investment advisory service 50 Park Investments, said: "There is a lot of heavy competition and the company has not figured out how to monetise its audience yet". Spiegel and Murphy each owned almost 211 million shares of the company when it went public back in March - meaning they've both taken about a $380 million hit (on paper) this morning.

The big issue is Facebook Inc (NASDAQ:FB), which has turned Instagram Stories into a Snapchat-copying juggernaut.

Instagram hit 250 million daily users for its Snapchat-copycat product, Instagram Stories, in June, up from 200 million in April.

Snap has a 52 week low of $11.90 and a 52 week high of $29.44 The company's market cap is now $0.

"If that's how (Spiegel) wants to play his cards that's fine, but there's going to be a trade off", said Jason Moser, analyst for Motley Fool. Facebook, with its 2 billion users, is enjoying record-high stock prices.

One of the numbers investors are most closely watching - the app's user count - also came up short.

Analysts said Thursday they were glad to see that Snap is gaining more money from the same clients.

As an example, Spiegel cited the company's World Lenses feature released this quarter.

CEO Evan Spiegel also noted that Snap's now infamous "dancing hotdog" has been viewed 1.5 billion times in the app.

Spiegel touted Snapchat's Memories feature, which acts like a camera roll for saving photos and videos that would otherwise expire. US Bancorp DE bought a new stake in shares of Snap during the first quarter valued at about $101,000.

"There is no technology platform that is specializing on a vertically focused video content network at the scale that Snapchat has targeted", Won said.

Snap reported average revenue per user of $1.05 in the second quarter, with most of its growth coming from North America, bolstering the company's argument that it's growing in the right places.

While Snap earlier this year said that it "may never achieve or maintain profitability", the company reported deepening losses of $443 million, a 282 percent jump from last year's $115 million, in part on increased costs on research, sales and marketing.

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