Coverage: Snap earnings disappoint, stock drops 17%
Snap, the parent company of the messaging app Snapchat, lost 17 cents per share on revenue of $230.7 million during the first quarter, missing analyst estimates and causing its stock to drop 17 percent in after-hours trading.
Greg Sandoval of Business Insider had the news:
The company’s revenue missed analyst expectations by 6%, exactly the kind of performance the company did not need. Snap’s CFO Drew Vollero provided more gloomy news.
“We are planning for our Q2 growth rate to decelerate substantially from Q1 levels,” Vollero said, “with growth in auction impressions, partially offset by pricing for both Snap Ads and Creative Tools.”
In after-hours trading, the stock plummeted as low as 17 percent. Shares closed regular trading down slightly to $14.13. Before Tuesday, Snap’s shares had fallen 33% since a February high of $21.22.
Nellie Bowles of The New York Times reported that the company will tweak its design to appease users:
On Tuesday, Snapchat’s parent company, Snap, said it would redesign parts of the app’s redesign after the overhaul had dragged down its business.
For the first three months of the year, the social media company reported Tuesday, it posted a narrower loss than a year earlier and a 54 percent increase in revenue, to $231 million, which was below analyst expectations. While Snap’s number of daily users rose to 191 million in the quarter, that figure was also below what Wall Street had anticipated. And the company said its user numbers in March were even lower, though it did not release them.
Evan Spiegel, Snap’s chief executive, cited Snapchat’s redesign as a major reason for the disappointing performance.
“A change this big to existing behavior comes with some disruption,” he said, referring later to “headwinds from the redesign.”
Michelle Castillo of CNBC.com reported that Snap also missed expectations on daily users:
Some users have started a Change.org petition to ask the company to revert back to the old version, while Snapchat power user Kylie Jenner tweeted in February she didn’t open Snapchat anymore due to the tweaks. The stock to tumbed 8 percent after her comments. She has since returned to the platform.
And redesign problems have persisted. In late April, the company said it would test another version of its redesign, leading to shares plunging as much as 9.5 percent the day after the after-hours announcement. One of the new updates would move friend stories back on the same tab as publisher and celebrity content — which is what many users were asking for —but with clear delineations.
It’s not all bad news for Snap. Spiegel said after the tweaks time spent on platform remained at more than 30 minutes per day, and user retention rates for older users have increased.
The advertising and businesses community also seem to be embracing some of the changes Snapchat has made. Khan said in prepared remarks advertising revenue hit $229 million during Q1, up 62 percent year over year. Chief financial officer Drew Vollero added sales growth continues to outpace cost growth.