(Corrects JPMorgan expectation of user growth in paragraph 8)
By Anya George Tharakan and David Ingram
May 10 Snap Inc shares plunged on
Wednesday after the owner of Snapchat reported slowing user
growth and revenue in its first earnings report as a public
company, missing some of Wall Street's estimates as it competes
with copycat messaging apps.
Its shares tumbled 23 percent in after-hours trading to wipe
some $6 billion from Snap's market value, a humbling reversal
for the company after its red-hot March initial public offering,
which was the biggest for a U.S. tech company since Facebook Inc
The stock fell to $17.66, only just above its IPO price of
Some investors were hoping Snap would surprise them with big
numbers in its first quarterly report, BTIG analyst Richard
"The fact that they failed to live up to expectations, let
alone exceed them, disappointed people," he said.
The performance echoed slides in Facebook and Twitter after
they posted debut scorecards following their IPOs. Twitter
shares cratered 24 percent the next day, while Facebook's
tumbled 11 percent, still the biggest-ever one-day losses for
Snap said its daily active users (DAUs) rose 36.1 percent to
166 million in the first quarter from a year earlier, marking a
slowdown from the 47.7 percent rise for the fourth quarter and
62.8 percent jump for the third quarter that the company
reported in its IPO filing.
The slowing rate of growth was in line with an estimate from
JPMorgan, which accurately expected 166 million DAUs for the
first quarter. Monness, Crespi, Hardt & Co Inc had pegged them
even higher at 173 million.
Snap's March IPO priced above the company's target range as
investors put aside concerns about a lack of profits and voting
rights to get a piece of the action. The IPO raised $3.4 billion
and gave the company a market valuation of roughly $24 billion,
and shares surged 44 percent in their first day of trading.
Facebook, which made a $3 billion bid for Snapchat in 2013,
has upped the ante by offering camera-related features similar
to Snap on its platforms, including Instagram and WhatsApp. The
company said in April that Instagram Stories alone had reached
200 million daily active users.
Snap Chief Executive Evan Spiegel, who received a
stock-based bonus worth nearly $600 million for taking the
company public, shrugged off imitations when asked about
Facebook by an analyst on a conference call to discuss earnings.
"If you want to be a creative company, you've got to get
comfortable with and enjoy the fact that people are going to
copy your product if you make great stuff," he said.
Making a comparison to the search industry, Spiegel added:
"Just because Yahoo has a search box doesn't mean they're
Snapchat's growth was faster than Facebook, however, which
said its overall daily user base grew 18 percent year-over-year
in the first quarter, as well as Twitter, which reported growth
of 14 percent in DAUs from a year earlier.
Snap's revenue jumped nearly four-fold year-over-year to
$149.6 million but fell short of the average analyst forecast of
$158 million, according to Thomson Reuters I/B/E/S. Revenue was
also down from the fourth quarter of 2016, a seasonally stronger
period for ad sales, when it was $166 million.
Revenue was "a relatively disappointing number," Pivotal
Research analyst Brian Wieser said. "To their credit," he added,
"they did guide towards a number that would be lower, which it
Average revenue per user was 90 cents in the first quarter,
Snap said, up from 33 cents the same quarter a year earlier but
below the $1.05 per user in the fourth quarter of 2016.
Snap's net loss widened to $2.21 billion, or $2.31 per
share, in the first quarter, from $104.6 million, or 14 cents
per share, due to stock-based compensation related to the IPO.
Although the figure of $2 billion in total stock-based
compensation was known ahead of time, investors were surprised
to see all of it show up in a single quarter rather than spread
out over time, said Eric Kim, managing partner at Goodwater
"It is an eye-popping number for sure," he said.
Snapchat launched in 2012 as a mobile app that allows users
to send photos, known as snaps, that vanish within seconds. The
company rebranded as Snap Inc last year, and moved into the
hardware space with Spectacles, its colorful sunglasses that
record short videos to post on Snapchat.
Users created more than 3 billion snaps daily on average
during the first quarter, up from more than 2.5 billion during
the third quarter of 2016, the company said.
Snap receives some revenue from branded or sponsored filters
and lenses, but depends on advertising dollars for the bulk of
its overall revenue.
Digital marketing firm eMarketer in March had trimmed its
2017 U.S. advertising revenue forecast for Snap by $30 million
to $770 million, citing higher-than-expected revenue sharing
with the company's partners.
The total U.S. digital advertising market is meanwhile
expected to reach $83 billion, according to eMarketer, up nearly
16 percent from last year.
(Reporting by Anya George Tharakan in Bengaluru and David
Ingram in San Francisco; Additional reporting by Angela Moon in
New York; Editing by Meredith Mazzilli and Bill Rigby)