Snap fails to expand user base as expected, shares hit record low

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Snap, Snapchat

Snap has failed to expand its daily active user base as per analyst expectations causing a steep decline in Snap Inc’s shares that fell more than 14 per cent to hit a record low on Friday morning.

While Snapchat’s second-quarter daily active users rose 21 per cent to 173 million from an year earlier, the growth wasn’t as per expectations of analysts that stood at 175.2 million. In comparison, Snapchat’s main rival Instagram Stories, where users and businesses can post a string of photos and videos that disappear after 24 hours, had more than 250 million users as of Aug. 2.

Some analysts attributed the miss to Snap’s decision to not issue a forecast, which resulted in aggressive Street estimates.

Snapchat launched in 2012 as a mobile app is popular among people under 30 who enjoy applying bunny faces and or other filters on to their pictures. One of its colorful filters, the animated rendering of a dancing hot dog, was viewed over 1.5 billion times in snaps created by Snap’s users.

While engagement of the messaging app was good, the slowing user growth has been a cause for concern.

Snap’s user growth was also hurt by problems faced by users of Android-based phones, mainly outside the United States. The company said it was working to improve the performance of its app on Android phones to bring it at par with the iOS app.

“We’re still in the early stages of making these improvements, and I would estimate that we won’t begin to see the meaningful results of these efforts until the second quarter of next year,” Chief Executive Evan Spiegel said on a conference call on Thursday.

At least seven brokerages cut their price targets on Snap. Jefferies cut its price target the most – from $30 to $16.

Of the 36 analysts covering Snap’s stock, only 11 have a “buy” rating or higher. Eighteen have a “hold” rating and seven a “sell” or lower. Their median price target is $19.

Shares of the social media company were trading at $12 on Friday.

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I am a Ph.D. trained neuroscientist with over ten years of experience in biomedical research, as well as grant, medical, and science writing. I have extensive experience in writing, editing, curriculum development, and educational consulting. I am also fluent in Spanish. I have lectured to both undergraduate and graduate students, published in peer-reviewed journals, and served as an ad hoc journal reviewer.

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