No Snapback for $SNAP Tanks 19% After Earnings Revenue Miss

Social media company Snap $SNAP, owner of Snapchat plunged 19% Tuesday after missing third quarter earnings expectations with a net loss of $443.2 million. The stock has been a great reminder of risk, herd mentality and like MySpace the perils of betting on social media longevity. 

Social media company Snap $SNAP, owner of Snapchat plunged 19% Tuesday after missing third quarter earnings expectations with a net loss of $443.2 million. The stock has been a great reminder of risk, herd mentality and like MySpace the perils of betting on social media longevity. It is a reminder, regardless of hype you can’t drop your guard in any way.

SnapChat Fail

Reaction: Snap Inc $SNAP After Hours 12.21 – $2.91 – 19.18%

Earnings: Net loss of $443.2 million, a loss of 14 cents per share versus loss of 15 cents per share expected with revenue: $207.9 million versus $236.9 million expected

  • Daily active users (DAUs): 178 million versus 181.8 million expected
  • Average revenue per user: $1.17 versus $1.30 expected

SNAP added 4.5 million new users, with CEO Evan Spiegel saying it grew DAUs “at a lower rate than we would have liked” in prepared remarks. $SNAP wrote down $39.9 million as a result of losses from unsold Spectacles, the charges a result of excess inventory and inventory purchase commitment cancellations. Average revenue per user was up 39 percent compared to this quarter last year, it failed to reach Wall Street’s estimates.

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This is not an insignificant move, $SNAP was the biggest initial public offering since Facebook (FB) and Alibaba (BABA). Facebook came public in May 2012 and Alibaba in September 2014. It seems Facebook is picking at a rotting casket picking all the good features out of snapchat and adding them to it’s own services. Such an example is trending ‘at the moment’ technology with Facebook was already copying and improving it. Again think back to MySpace and so many others.

The employee lockup expiration in August saw a new record low trade at 11.28 on Monday, 33% below its IPO price of 17. With the lockup expiration an estimated 800 million Snap shares became available for trading that Monday, including 422 million shares held by Snap Chief Executive Evan Spiegel and co-founder Robert Murphy. Both Spiegel and Murphy said they would not sell any stock this year.

The company is losing market share to instagram, especially since the launch of feature Stories in 2016. However some ad technology platforms said there’s been increased company interest in Snap especially because  with its different demographic including better location-based targeting and augmented reality features. $SNAP is more popular with younger audiences which led Facebook $FB to buy tbh Anonymous App To Compete With $SNAP.

Social Media Platforms

This has not been a surprise here, after Q1 earnings TC analysts noted “The worrying sign, remember this is all about dominance and market share Snapchat’s user growth slowed to its lowest pace in years. Snap added 8 million new daily users the first three months of the year, year-on-year growth of 36%. Momentum has slowed, this time last year, Snapchat was growing its DAUs by 52%. Instagram Stories recently outpaced Snapchat by reaching 200 million daily users.” Second quarterly earnings released on Thursday missed estimates on all the key metrics. Snap said second-quarter revenue rose 153% to $181.7 million while it posted a loss at 16 cents a share, with revenue missing the consensus estimate of $189 million. Adjusted earnings missed analysts 10-cent loss.

Second quarter results clearly showed Instagram was ploughing ahead Instagram reported its daily user base touched 250 million in June 2017 vs. 173 million reported by $SNAP. The agressive purchase by Facebook of tbh shows $FB is after total domination.

Remember this risk ignored?

Another Risk – no-voting rights

Snap’s IPO Class A shares sold in this offering have no voting power. This is a move by management that has never been seen before in any other IPO. A gamble that paid off with the hype of record stock market levels and the hype of the social media aspect. (the herd don’t care about details)

Furthermore 50 million shares of the offering are be subject to a one-year lockup agreement. This eliminates the ability to sell on the first day and the traditional selling pressure by taking a quarter of the float off the market. Here we are with the lock up expiration and we are at all time lows.

Source: AlphaStreet, TradersCommunity

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