Snapchat Shares Down on Weak Earnings and User Growth

Shares of Snapchat parent company Snap Inc touched a new low on Wednesday after the company posted a decline on its user growth led by the failure of its social messaging application redesign as well as its weak quarterly earnings report.

Snap shares which were down by more than 20% to trade at $10.96 per share during the early trading session was led by concerns from investors regarding the inability of the company to level out with other social media companies such as Facebook as well as its subsidiary Instagram,

The company launched its IPO more than a year ago started at an initial public offering price of $24 per share. The stock then plummeted shortly by around $17 since the launch of the IPO due to concerns of the company regarding its daily active users growing weaker.

Losses of the company seen during the past couple of quarters have weighed in on the direction of Snap Inc shares and have continuously caused various concerns from investors.

Due to this, the company decided late last year that it will undergo a dramatic redesign of its mobile photo and video sharing application in an effort to help drive user growth and prevent any further decline in their revenue and sales driven from advertisements primarily.

However, the full rollout of the update did not turn things around for the company and resulted into a further decline in their users as well as sales numbers due to a negative reaction from the public regarding the application’s new design.

Earnings Result

For Snap Inc’s first quarter report, the company posted earnings that missed most analyst estimates for their revenue and user growth among many other factors. This led to analysts cutting their price target on Snap Inc shares which pushed the shares to trade down by 22% during the recent trading session.

While Snap posted 191 million daily active users representing an increase of 4 million from the previous quarter, this was still below most analyst estimates and forecasts of 194 million. Snap posted a rise in their revenue of around 34% from the period a year ago to $1.12 which is down by 21% from analysts expectations of 21%.

For the first quarter report, Snap posted cash and equivalents of $1.8 billion while their capital expenditures jumped to $36.3 million which is up from their capital expenditures of $18 million from the same period last year.

The company stated that it intends to reverse some of the changes it made to the application due to various complaints from users that have made it more difficult for some to look for posts from celebrities.

Alibaba’s cloud computing business also have shown mostly an upbeat outlook the company seeing more businesses shifting to cloud computing technology from servers as well as broadband subscriptions. Alibaba’s cloud computing business alone has attracted attention and has seen a growing number of partnerships with companies outside China.

FSMSmart gives you the latest news updates, market trends, and news about forex, commodities, stocks and many more! Open an account now and learn more about other investment opportunities on FSM Smart.