Snap Stock Tumbles As Investors’ Stomachs Sour Over Messaging App
Share prices continue to sink for Snap Inc, the camera company behind the popular Snapchat application, with prices dipping as low as $11.90 on Friday. The company’s share prices have continuously tumbled since its original foray into the marketplace, where they were priced at $17 a share.
Based on its dismal performance Friday, the company’s share prices have now sunk to their lowest point since its blockbuster IPO, which drew headlines for its impressive $33 billion valuation, according to CNBC. The company’s original success shows just how far it has fallen since then; Snap’s current market valuation now rest at around $13 billion.
Snapchat’s growth has steadily declined in the past four quarters, adding only 7 million users during 2017’s second quarter when it should have been garnering 8 to 10 million. Its lackadaisical growth has driven investor’s ire, and company executives have warned that sales growth could even diminish further in the coming months.
Snap’s IPO was one of the largest American IPOs since the Alibaba Group Holding Ltd.’s in 2014.
Snap’s stock, according to Fortune, originally fell below its original IPO price of $17 in July, when it hovered around $17 before dropping down to $16.99. Investors who bought into the company during its highly-anticipated IPO have thus lost serious money already, with Friday’s performance acting as another nail in the financial coffin.
While Snapchat had around 148 million users this time in 2016, its current user base has only grown to reach 173 million daily active users. Laura Martin, managing director of equity research at Needham & Co., voiced her awe over the slow growth in an interview with the L.A. Times.
“How can Facebook be adding 50 million this quarter despite reaching 1.3 billion daily active users, and Snap [at 173 million daily active users] can’t add 8 to 10 million,” Martin told the Times. “That is why the shares are down — and they should be!”
The irony of being beat by Facebook likely isn’t lost on the camera company; Snap CEO Evan Spiegel reportedly turned down an offer of a $3 billion takeover from Mark Zuckerberg in 2013. Snap’s biggest rival, Instragram, is owned by Facebook, and offers many similar features, appealing to many of the same users that Snap does
The company’s Q2 earnings report shows just how much it is struggling in the market, according to Business Wire. Snap lost nearly four times as much this quarter as it did during Q2 in 2016, accumulating a dizzying $443 million in losses. Not everything is dim for Snap, however; 4 million of its recently added users come from the North American region, which has been a particularly lucrative area for the company.
Snap doesn’t rely entirely on snapchat ads for its revenue, either. The company reported $5.4 million in other revenue in Q2, most of which came from its outsourced bookkeeping service and sales of its “Spectacles,” which are sunglasses that allow users to take pictures instantly. But even this revenue stream has shrunk by 35 percent from Q1.
Investors can take some comfort in the innovation the company is introducing, including story ideas and the use of AI-enhanced filters. Snap’s latest figures peg the average user as taking about 20 snaps a day, however, many of its features are easy to copy by rivals and if the company’s earnings reports don’t turn positive soon, this number could dwindle as Snap continues to lose the wind in its sails.
[Featured Image by Drew Angerer/Getty Images]
