Shares of Snapchat parent Snap sank to new lows on Thursday after the company reported a hefty quarterly loss and user growth which missed Wall Street expectations.
Revenue at the California-based company more than doubled to $182 million while its loss soared to $443 million in the quarter that ended June 30, according to an earnings release.
Snap reported a loss of $116 million in the same quarter last year.
Meanwhile, the average number of people using the vanishing message service daily rose 21 percent to 173 million when compared to the same period a year earlier.
Market watchers had expected the ranks of users to grow to 175 million, with Snap missing the mark.
Snap shares plunged more than 16.8 percent to $11.45, touching new lows before gaining back ground, in after-market trades that followed release of the earnings figures.
Snap shares have been trending down for several months, with Morgan Stanley analyst Brian Nowak putting out word that Snapchat advertising products were not catching on as quickly as had been expected.
Nowak said Snapchat is also facing tougher competition from Facebook-owned Instagram, which has been offering similar services.
Snap was the largest IPO of 2017 and rose more than 40 percent from initial trades to give it a market value of some $34 billion, but the recent slide has cut its valuation by more than half.
Snap chief executive Evan Spiegel said during an earnings call that he and fellow co-founder Bobby Murphy “believe deeply” in the longterm success of the company and would not sell any of their shares this year.
– ‘Missed deadline’ –
Snapchat became popular among young smartphone users for its disappearing messages, often photos or video but analysts say it needs to show strong growth to keep pace in the rapidly evolving social media sector dominated by Facebook.
Although Snapchat is best known for its smartphone messaging, it has also developed partnerships with numerous media outlets eager to reach its audience with news, video and other content.
Global Equities Research analyst Trip Chowdhry stamped Snap “total junk,” arguing that it lacks the fundamentals to succeed.
Snap executives, however, expressed confidence during an earnings call with analysts that fresh advertising tools and an increase in the amount of time people spend using Snapchat were among factors positioning the company to excel in the long term.
Market tracker Pivotal Research Group said in a note to investors that Snap showed encouraging signs when it came to advertisers spending more money, new products, and expansion outside the US, but still expected shares to sink closer to $9.
Snap needed to get big fast after Facebook stepped in as a competitor with Instagram, but “missed the deadline” and is now fighting head-on against the world’s leading social network.
“Snap is running against a melt-billion-dollar, profitable giant that can expand into Snap’s area without even stretching hard,” said analyst Rob Enderle of Enderle Group.
“It is a case where they are overmatched.”
Facebook reportedly tried unsuccessfully to buy Snapchat for $3 billion, then went on challenge it with its own spin on the service, unabashedly copying popular features.
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