Snap drops 6% as investors mull sluggish user growth

  • Snap shares fell 6% Wednesday morning as the rally that developed in the wake of its first-quarter results faded.
  • The company beat on both the top and bottom lines, but user remained sluggish.
  • Watch Snap trade live.

Snapchat parent-company Snap posted first-quarter results on Tuesday evening that beat analyst expectations on both the top and bottom lines, sending the stock soaring by as much as 10%.

However, that excitement has faded as investors have had to grapple with user growth that has been sluggish over the past year. Shares were down as much as 6% early Wednesday.

The company lost an adjusted $US0.10 a share on revenue $US320 million during Q1, beating the $US0.12 loss and $US307 million that analysts surveyed by Bloomberg were expecting.

While the revenue and earnings numbers were welcome, investors’ view on the company may have changed due to the sluggish growth in daily users which have stalled at around 190 million globally, up 2% from the prior quarter.

One highlight for the quarter was the roll-out of a redesigned Android app, addressing a key concern for the company’s global growth prospects.

“Our new Android application is available to everyone, with promising early results,” said CEO Evan Spiegel in the company’s earnings release. “This month we announced several new products that we believe will drive further engagement and monetisation.”

Snap also announced a range of new initiatives at its developer conference held earlier this month, prompting positive commentary from research analysts.

“New products including Snap Games, Audience Network, and Ad Kit provide additional long-term monetisation
opportunities,” according to Oppenheimer research analyst Jason Helfstein.

Snap’s surging stock price this year indicates the company has regained its footing after dealing with a raft of issues, including the loss of two CFOs within eight months, criticism of its Snapchat redesign, and the failure of its Spectacles product.

Snap was up more than 105% year to date.

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