Snap User Growth Rises But Misses Forecast

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The owner of Snapchat reported better-than-expected quarterly results but slowing user and revenue growth appeared to weigh on investors.

Snap’s revenue, which comes from advertising sales, rose 17{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} to $454.2 million in the second quarter, beating estimates of $439.1 million but declining sharply from the 44{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} growth in the previous three months.

Snap also reported its daily active users at 238 million, up nearly 4{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} from the 229 million the company reported in April and up 17{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} from a year ago. But daily active users grew 20{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} in the first quarter and Snap had projected growth to 239 million in the second quarter.

Average revenue per user was $1.91, barely changed from the year-ago quarter.

The company’s shares fell 6.3{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} in after-hours trading Tuesday as CFO Derek Andersen indicated that the user growth Snap saw at the start of coronavirus lockdowns petered out sooner than expected.

“At the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimates,” he said in written remarks. “This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”

Snap is now forecasting 242 million to 244 million daily active users in the current quarter, below analysts’ target of 244.82 million.

As Investor’s Business Daily reports, “The Snap earnings report comes as investors have remained concerned about the growth rate of ad spending as a result of the pandemic.”

“The operating environment has remained challenging as COVID-19 continues to impact macroeconomic conditions, and the businesses of our advertising clients,” Andersen said.

“Many of our advertisers have seen interruptions in their businesses, especially those that rely on in-person interaction with their customers such as restaurants, entertainment venues, transportation services, physical retailers, and hospitality providers among others,” he added.

Snap also posted an adjusted loss of 9 cents per share for the second quarter compared with Wall Street estimates of a loss of 23 cents per share. The company’s stock is still up 38{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} for the year.

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