Snapchat's disappointing growth leads to shares slump

Snapchat co-founders lose $2 billion after poor Q1

Snapchat's disappointing growth leads to shares slump

Just last week, Facebook posted revenue growth in the double digits for its first quarter, which it has done consistently since 2012 when it had its initial public offering.

Shares in Snapchat's parent company Snap Inc. have plummeted in value by nearly a quarter - to the tune of $6 billion.

On Tuesday, the company posted a $2.2 billion loss in the first quarter, much of which was tied to compensation following the companys IPO in March. Analysts were only anticipating a loss per share of $0.19. Subsequently, shares in Snap have plummeted, tumbling more than 20% in after-hours trading in NY.

Snap shares dropped almost 20 percent Thursday morning after its first quarterly report as a public company on Wednesday showed net losses of $2.2 billion, due to $2 billion in expenses for stock-based compensation.

The company raked in $149.6 million in revenue, falling short of analyst expectations of $158 million.

Growth in Snapchat's user base began to slow down past year after Facebook's Instagram copied Snapchat's "stories" feature, which lets users post short video clips that disappear after 24 hours.

However by that time, Facebook's users were already 552 million or over three times the number of Snapchat. Meanwhile, the company has been burning fuel, losing $2.2 billion in the quarter on revenue of $150 million.

"At the end of the day, just because Yahoo has a search box doesn't mean they're Google", Spiegel says, a clumsy metaphor that improbably compares Snap to Google's position in the search engine wars.

The slowing rate of growth was in line with an estimate from JPMorgan, which accurately expected 166 million DAUs for the first quarter. Facebook, for example, has been snapping up features present in Snapchat and incorporating them into its own products.

From a long-term business perspective, Snap Inc. has to come up with ideas to not only expand its user base beyond messaging, but also beyond millennials.

At the time of this writing, the stock is tanking, and is down an astounding 25 per cent in after hours trading. Oof. Edge Wealth Management LLC bought a new stake in shares of Snap during the first quarter valued at $257,000.

According to Reuters, the $27.98 billion company's weak user growth could be attributed to intensified competition from Facebook Inc (FB), which increasingly copies SNAP's formats across all its platforms.

Many companies that just reported disappointing numbers might seek to soften the blow on their earnings calls by delivering more insight into how the numbers will improve in the future.

Facebook eventually recovered; Twitter is still fighting to refute the Wall Street narrative.

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