Snap Earnings Preview: User Growth And ARPU in Focus

Leigh Mccormick
August 12, 2017

Snapchat's parent company Snap's shares tumbled in extended trading last night as the social media giant's rise in daily active users (DAUs) for the second quarter missed analysts' expectations. While that's a gain of 21 percent year-over-year, it represents growth of 4 percent (or 7 million new users) from the previous quarter, down from growth of almost 24 percent in the second quarter of 2014. (NYSE:SNAP) by 6.3% during the second quarter, according to its most recent disclosure with the SEC.

Revenues rose to $182m, more than double the figure for the same period previous year - but investors had been looking for a figure of around $186m. As of December 31, 2016, on an average, 158 million people used Snapchat every day to Snap with family, watch Stories from friends, see events from around the world, and explore curated content from publishers.

The closely watched daily active user (DAU) count rose by 7 million sequentially and 30 million annually to 173 million, falling slightly short of a 174.6 million consensus.

Snap has struggled since going public in March amid concerns about disappointing user growth, mounting losses, and the end of its stock lock-up period, which opens the door for insiders to sell their shares.

Also weighing on the stock: Employees will also be able to sell their shares on the public market for the first time next week, presenting an ultimate test of confidence in the company.

The news comes as Facebook's Instagram continues to encroach on Snapchat's users, by offering simlar features.

Yes, Snapchat is far from the only young company to have sentiment turn against it. The pair's post-IPO lockup will expire Monday.

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Snap, the owner of messaging app Snapchat, has reported a second-quarter loss of $443m (£341m), up significantly from the $116m loss it posted in the same period of past year. "We believe deeply in the long-term success of Snap", Spiegel told analysts on a conference call - referring to himself and Snap's co-founder and chief technology officer Robert "Bobby" Murphy.

Slowing user growth reported by the company was an additional problem over the April to June period.

Pivotal's Brian Wieser was one of the few analysts who considered Snap's results "in line" with his forecast.

Snap has not delivered on either front.

"This was a "make or break quarter"-Snap has tremendous potential if it can capitalize on the opportunity in front of it as an alternative platform for advertisers", but the company is "under pressure from multiple fronts".

Several other research firms have also weighed in on SNAP. Its confirmed acquisition of the ad company Placed will be reflected in its third-quarter financials, as that deal was closed in July.

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