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Home / Technology / Snap stocks volatile after first-quarter guidance and user decline

Snap stocks volatile after first-quarter guidance and user decline



In light of fears of a significant decline in revenue growth, Snap Inc.'s stock gained 10% before dropping around 5% yesterday's session on Tuesday after it released quarterly reports and reported a user for the first time had

Snap Ware ended after close of trading by 0.6%.

At Snap's high-end sales forecast, it met Wall Street expectations for the upcoming third quarter as opposed to its social media rivals Twitter Inc.

TWTR, -0.94%

and Facebook Inc.

FB, -1

.01%

faltering by investors for weak or flat user growth and providing guidance that was a source of concern to investors. But Snap also reported that its global daily user base has dropped compared to the first quarter, even as the company generated more revenue from each user.

Snap

SNAP, + 0.54%

Executives said in the second quarter on Tuesday that the decline in user numbers is related to the company's unfortunate redesign efforts, but would not provide guidance for the second half of the year of the year. CFO Tim Stone pointed out that user growth slowed historically in the third quarter compared to the second quarter.

The Los Angeles-based company expects revenue of $ 265 million to $ 290 million for the third quarter, slightly exceeding the Wall Street estimate of $ 289 million on the upper end. Addressing the revenue forecast in the earnings survey, Stone pointed out, among other things, the company's lower advertising prices, including the move to its self-serving technology.

"These were not mixed results on the financial side," said Forrester analyst Melissa Parrish. "Every important number on the financial side seemed to increase, and average revenue per user increased, which means it can support higher ad charges, and the other reason why average user revenue is rising is that it orders higher prices. that the programmatic efforts pay off. "

See also: Facebook copies Snapchat and it hurts

Most of the money that Snap makes comes from ad sales within his Snapchat app, a business that brought the large majority of the company's $ 262.3 million second quarter revenue, with the North American region adding $ 177.4 million to the peak and $ 40.2 million to Europe. Analysts had expected sales of $ 249.5 million.

Snap said on its payout that the company has now moved all its ad products to its programmatic or self-serve platform. Previously, the company had relied on a cumbersome manual process to initiate an insertion order. Despite switching to a programmatic platform, Stone said that 25% of ad revenue remained outside its self-service channels in the second quarter.

The downside of moving to programmatic buying is declining ad inventory prices, but seen in the long run With Snap, you can capture the long tail of small and mid-sized companies that have made Facebook and Alphabet's success

GOOGL, + 1.47%

GOOG, + 1.42%

Google.

"Snap & Q2 performance is evidence that consumers and advertisers continue to rely on the platform for ephemeral content," said Aaron Goldman, chief marketing officer of 4C, an advertising technology company. Goldman said 4C increased its Snap ad spend by 45% over the same period last year.

But even as Snap improved his ad business, it was still bleeding red ink. The company recorded net losses of $ 353.3 million for the quarter, which equates to 27 cents per share, down from 36 cents per share in the same period last year.

See also: Amazon becomes a promotional giant

The latest version of its eyeglass camera glasses was launched during the quarter, but the company did not break out or discuss selling the hardware.

A key health indicator for the company is its user base, which reports Snap as the daily active user. This number increased 8% year-on-year, but declined 2% year-on-year to 188 million. However, there was also a slight increase in growth for users over 35, an age group that has already done so has been difficult for the company to grow. Executives also said that some of the daily lost users sign up each month, a data point that Snap does not pass on to investors.

Each user continues to be worth more than Snap, and average revenue per member increased 34% year over year to $ 1.40. North America is Snap's most valuable market, with average user revenue of $ 2.21.

Do not Miss: Snap's first shareholder meeting disappeared as fast as it began

After the closing bell Tuesday, Prince Alwaleed bin Talal of Saudi Arabia said he has a stake of around $ 250 million in Snap , or 2.3% of it's Class A share. The prince met Snap's CEO in 2015 on a trip to Riyadh, Saudi Arabia.

"Snapchat is one of the most innovative social media platforms in the world and we believe it has just begun to scratch the surface of its true potential and we are blessed to be a part of it," the prince said.

Snap- Equities closed less than 1% at $ 13.12, and before Tuesday's after-hours, Tuesday saw a 22% rise over the past three months. The S & P 500 Index

SPX, + 0.28%

increased 7% over the same period.


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