Published: Fri, August 11, 2017
Hi-Tech | By Grace Becker

Snap Inc.'s Slow Second-Quarter Growth Disappoints Wall Street

Snap Inc.'s Slow Second-Quarter Growth Disappoints Wall Street

Shares fell almost 8 percent to below $13 at one point in after-hours trading after closing at $13.77, up 21 cents on the day.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time.

"There is a lot of heavy competition and the company has not figured out how to monetize its audience yet", said Salvatore Recco, executive vice president at 50 Park Investments, an investment advisory service. Snapchat had 148 million users this time a year ago.

Snap's stock, which was priced at $17 for its public offering in March, is now trading at less than $14. But investor doubts began to set in as Snap's user growth continued to slow, especially as rivals like Instagram began copying innovative features that once set Snapchat apart, including augmented reality images and disappearing content. Equities research analysts predict that Snap will post ($0.56) EPS for the current fiscal year.

Instagram hit 250 million daily users for its Snapchat-copycat product, Instagram Stories, in June, up from 200 million in April. This is an important metric for Snap because because the company says it's a good indicator of its business growth - and a reflection of its strategy to push hard into more mature advertising markets. The firm now has $13.84 price objective on the stock.

All that aside, let's jump into Snap Inc's financials for the quarter.

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He estimated that a quarter of people with smart phones in the US, UK and France use Snapchat every day, with users typically spending more than 30 minutes daily on the site. Chief among those tactics was making the app more accessible to Android users. Some analysts have expressed concerns over the results of last quarter's user growth and ARPU.

Johnny Won, founder of tech consulting firm Hyperstop, said the market is not recognizing Snapchat's potential as a mobile-first service.

Snap, which launched its IPO at the beginning of March this year, also revealed its revenue more-than doubled to $181.7m (£140m) in the quarter. The company earns some revenue from branded or sponsored filters and lenses, but the bulk comes from advertisements. WFG Advisors LP acquired a new stake in shares of Snap during the first quarter worth about $109,000.

Wall Street is expecting the company to report a loss of $US0.33 per share on revenue of $US185.78 million, according to data from Bloomberg.

In light of the 20% plunge shares of Snapchat-parent Snap Inc (NYSE:SNAP) suffered following the mid-May release of its first-quarter numbers, SNAP stock holders were understandably nervous as Thursday's closing bell approached.

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