Snap beat Wall Street's expectations for Q1 2019, but its user growth is still stalled

GettySnap CEO Evan Spiegel.

Snap, the parent company of the photo-sharing app Snapchat, defied analysts’ expectations in the first quarter of the year – as its better-than-expected revenues and earnings per share briefly sent its stock soaring after it reported its results.

But investors appeared to have second thoughts as they contemplated the company’s stalled user-growth numbers, and Snap shares quickly gave back most of the gains.

The company saw $US320 million in revenue for the quarter, besting consensus estimates of $US307.4 million and growing 39% year-over-year. And it enjoyed 190 million daily active users, versus a 186.8 million prediction.

The results are welcome news for the company, which has struggled as it faces sustained pressure from the Facebook-owned Instagram and has suffered in the wake of a widely criticised redesign in 2018. But even before Tuesday’s results, Snap’s stock had been making a comeback: Before market close, it was hovering around $US12 a share – up more than 100% from lows of less than $US5 in December 2018.

Snap’s stock initially leaped as much as 12% in after-hours trading after the news, but it has since receded. As of writing, it was up about 2.5%.

CEO Evan Spiegel hailed the company’s growth in daily users and revenues in a statement and said the company’s new Android app – long promised as a key to unlocking future growth – was yielding “promising early results.”

Here are the key numbers, as well as what Wall Street was expecting (estimates via Bloomberg):

  • Earnings per share (adjusted): minus $US0.10 (minus $US0.12 predicted)
  • Revenue: $US320 million ($US307.4 million predicted)
  • Daily Active Users: 190 million (186.8 million expected)
  • Q2 revenue guidance: $US335 million to $US360 million, versus $US348 million expected by analysts
  • Q2 adjusted EBITDA guidance: negative ($US150 million) to negative ($US125 million).

In a copy of his prepared remarks released ahead of Snap’s earnings call with investors, Spiegel emphasised the company’s reach with young people: “We have achieved significant reach with Millennials and Gen Z in key markets like the United States, where we now reach 75 per cent of all 13-34 year-olds. As of March, our ads can now reach more 13-34 year-olds than Instagram in the United States.”

That said, the company’s user growth, while not declining as much as feared, appears to be stalled, as the chart below shows:

Screen Shot 2019 04 23 at 1.29.39 PMSnap

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