(Bloomberg) – Snap Inc. lost its own forecast for user growth last quarter and made no projections for the current period, a reminder of how difficult it is to predict business direction during the pandemic.
The company, which owns the social media app Snapchat, said the daily active user gains seen at the start of the Covid-19 outbreak have stabilized. Although the revenue beat analyst estimates and is on track to do so again in the current period, Snap promises nothing. Instead, he said you can’t count on the events that generally drive third-quarter advertising sales, such as sports games, movie releases, and back-to-school shopping. Shares fell about 6% in recent trades.
“At the beginning of widespread shelter-in-place requests, as people sought to stay connected and entertained from home, we saw an increase in daily active users who reported our initial estimate,” Chief Financial Officer Derek Andersen said in prepared statements to investors. “This initial uprising dissipated faster than we anticipated as shelter conditions in place persisted.”
In a statement Tuesday, Santa Monica, California-based Snap said that daily active users in the June period grew 17% to 238 million, compared to an estimated 239 million. The shares fell as low as $ 21.30 in extended trades before catching up on some of the late losses.
“The stock is not valued in revenue or profit, it is valued in users,” said Michael Pachter, an analyst at Wedbush Securities. “Investors don’t like to slow growth.”
The results can serve as a benchmark for the social media industry, where Snap competes with Facebook Inc. and Twitter Inc. for advertising money and user time. Those companies have yet to report results for the June period, but both said earlier this year that the pandemic was holding back spending on digital advertising. Facebook is now also facing a boycott by dozens of major brands, who are taking breaks on the social network to protest their policies towards hateful and misleading posts. Some of the advertisers have said they were also stopping spending on other social media.
Snap, whose app is especially popular with youth and faces less pressure on offensive content than its peers, attracted $ 454.2 million in second-quarter sales, a 17% increase from the previous year, while analysts on average had projected $ 441.6 million.
The company has been working to change its business, improving offers for advertisers after the instability that followed its initial public offering in 2017. At that time, Snap switched top managers, redesigned its app, and improved its Android product, helping the company grow in markets beyond the US and Europe. Optimism for the recovery pushed shares up 52% this year. It is now trading near levels not seen since the days after it went public.
Analysts said they had high expectations for Snap, especially after the company’s developer summit highlighted opportunities to earn more revenue from users. The company has invested for years in augmented reality for e-commerce, such as trying on shoes virtually from home, which has the potential to become a mainstream more quickly as consumers are encouraged to stay home.
“This is a 4.5-star result, and the buying side was probably expecting a 5-star result,” said Rohit Kulkarni, an analyst at MKM Partners.
Snap’s net loss expanded to $ 326 million, or 23 cents a share, from $ 255.2 million, or 19 cents, a year earlier. Excluding certain items, the loss was 9 cents per share, compared to the average loss of 10 cents projected by analysts.
In his comments, Snap CFO Andersen pointed to other “challenging circumstances,” such as advertisers who temporarily paused their campaigns to change their messages to be “more appropriate for the moment,” as the United States exploded in protests against police violence against blacks. .
(Updates with analyst comments in the fifth paragraph).
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