Snapchat (SNAP) Stock Drops 11% as Revenue Fails to Meet Analysts’ Expectations

Updated on Feb 5, 2020 at 10:50 am UTC by Daria Rud · 3 min read
Snapchat (SNAP) Stock Drops 11% as Revenue Fails to Meet Analysts’ Expectations
Photo: NYSE / Twitter

Snap’s revenue did not meet analysts’ expectations of $563 million which had a negative impact on SNAP stock price. However, the company managed to increase its daily active user base.

Recently, Snapchat’s parent company Snap has published its Q4 2019 earnings. It has turned out the company has not lived up the revenue expectations of Wall Street analysts. As a result, Snap stock has dropped 11%.

According to Snap, they have increased the fourth quarter revenue 44% year-over-year to $561 million. However, the revenue fell short of forecasts of $563 million. Further, Snap reported a net loss increase to $241 million, or 17 cents per share. As for positive results, operating cash flow improved by $59 million to $67 million in Q4 2019, compared to the previous year. Besides, Snap has boasted a 17% increase in daily active users. Now their amount makes up 218 million.

Snap CEO Evan Spiegel commented:

“In 2019 we saw momentum across the board. We grew our community by 31 million daily active users, accelerated our revenue growth, and progressed towards profitability by improving full-year Adjusted EBITDA by 65% year-over-year. The strength in our core business gives us confidence in our long term growth and profitability and we’re excited to build on these results in 2020 and beyond.”

In 2019, the company performed quite well, therefore its shares skyrocketed by more than 144% then. After the latest report, Snap stock drops 11%, which may be a bad sign. At the moment of writing, Snap shares cost $18.98. The price of SNAP has started to recover from a significant fall.

Snap and Its Up-and-Down Performance

Snap is an American camera and social media company initially known as Snapchat Inc. However, after developing two more products, Spectacles and Bitmoji, the executives rebranded the firm as Snap Inc. to include the products under a single company.

In 2017, Snap ran an IPO that brought the company about $272 million. The business was considered as unprofitable but after the IPO, the company’s shares skyrocketed, therefore analysts changed their minds. Snap seemed to have proved it could be a strong competitor for Facebook and Instagram.

In 2018, Snap’s native app Snapchat changed its design drastically. This change was met with criticism and led to significant user declines.

Having realized its mistakes, Snap started to correct them. The company introduced more augmented reality filters and a rebuilt version of its Android app. As a result, Snapchat began adding users again. The platform added more than 30 million daily users in 2019, ending the year with 218 million daily active users. According to Debra Aho Williamson, principal analyst with eMarketer, the user growth was strong last year.

He said:

“Snap slightly beat our expectations for revenue in the 2019 fiscal year, and the growth of its ad business shows that marketers want to engage with its youthful audience.”

Recently, Snap acquired Ukraine-based startup AI Factory. Notably, AI Factory has its roots in Snapchat’s previous acquisition of another Ukranian startup Looksery.

Snap faces increasing competition from Facebook, Instagram, and TikTok. Therefore, the company’s team has to do their best and put much more effort to remain its position in the industry.

Business, Markets, News, Social Media, Stocks
Daria Rud
Author: Daria Rud

Daria is an economic student interested in the development of modern technologies. She is eager to know as much as possible about cryptos as she believes they can change our view on finance and the world in general.

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