Published: Sat, May 13, 2017
Business | By Max Garcia

Snapchat shares plummet as company posts $2.2 billion loss

Snap shares plunged to US$17.59, their lowest since the initial public offering on March 2, wiping off more than US$6 billion of its market value. As a result, Snap's stocks took a bad beating, pushing shares down by 25 percent by the end of the day. For advertisers, the biggest hurdle is "education" about how effective Snap's products can be, he said.

"The 7 million daily active users net-adds were not strong enough to disprove the "Facebook is crushing Snapchat" thesis", which we think will persist for a while", Barclays analyst Ross Sandler wrote in a client note.

After reporting revenue and user growth that missed estimates, Spiegel spoke as if the quarter was a success. Monness, Crespi, Hardt & Co Inc had pegged them even higher at 173 million.

Disclosure: CNBC parent NBCUniversal is an investor in Snap. The IPO raised $3.4 billion and gave the company a market valuation of roughly $24 billion, and shares surged 44 percent in their first day of trading.

The new features enable users to loop videos for repeated play or to re-view an incoming Snap for as long as they like without the normal automatic deletion kicking in after one viewing.

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

The call marked Spiegel's debut as an executive publicly answering questions about his company, after much practice during Snap's IPO roadshow with investors behind closed doors.

"You have to get comfortable with the fact that people are going to copy you if you make great stuff", he said.

"If we had just in the beginning encouraged snapchatters to add all their friends in (their) contact book instead of just few of them, they might be really uncomfortable creating snaps and adding them to their stories", he said, according to a transcript of the call.

With regards to user growth, Snap reported 166 million daily active users for its social media app for Q1 2017.

Snap disappointed analysts with reported revenue of $149.6 million in the three months ending in March.

As part of Snap's IPO in March, the company spent nearly $2 billion in stock-based compensation, which has greatly contributed to their net loss.

"It is an eye-popping number for sure", he said. They included new products such as Stories, Memories, Lenses and, most recently, Spectacles, camera-equipped sunglasses that allow users to more easily capture and share 10-second snaps. The company rebranded as Snap Inc previous year, and moved into the hardware space with Spectacles, its colorful sunglasses that record short videos to post on Snapchat. Snap's quarterly revenue was up 285.6% compared to the same quarter past year.

Snap receives some revenue from branded or sponsored filters and lenses, but depends on advertising dollars for the bulk of its overall revenue.

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