Shares in photo sharing service Snapchat have fallen after the company announced lower than expected growth in the first three months of 2017.
Snap Inc. Shares Fall amid Slow Growth
Snap has announced that the number of daily users on the platform increased just 5% to 166 million compared to growth in the same period last year.
These are the company’s first results since floating.
The announced number of daily active users was two million lower than was anticipated, even though it is 166 million than it was in the first three months of 2016.
The results saw shares fall by more than 20% in New York afterhours trading.
The service reported an adjusted loss of $188.2, which was also an estimated $10m higher than what analysts had anticipated.
Meanwhile, the net loss rose to 2.2bn up from $104.6m and this was attributed to costs related to the IPO earlier in the year.
In the first three months, revenue saw a 286% increase, rising to almost $150m, although this was 9m lower than the forecasts.
In a conference call, co-founder Evan Spiegel said the company was focusing on improving Snap’s performance and marketing its Android app, which he insisted could be a source of greater growth, compared to creating and promoting an Apple iOS app.
More work to do
He said, “We still have a lot of work to do but we are excited by the progress made in a short time.”
In response to a question about whether he feared Facebook might crush Snap, Mr. Spiegel said, “You have to accept the fact that people will copy you if you make great stuff.”
He added, “Just because Yahoo has a search box doesn’t mean they are Google.”
Many analysts continue to be skeptical of the long-term viability of Snap.
Investors were not expecting much either but the latest announcement was bitterly disappointing.
According to analysts, the poor growth, huge losses and no clear signal that the company has anything to fight off competition by Facebook is not a good sign.
Mr. Spiegel insisted that the low active user numbers could be attributed to not annoying users with constant updates and notifications.
However, during the conference call, an investor asked Mr. Spiegel what the future held, but the cofounder could not provide an answer.
Although Snap has a lot of money in the bank, Facebook continues to be a major obstacle to Snap’s growth.
Snapchat was founded in 2012 as an app service that allows mobile users to share photos that vanish after a few seconds.
Snap shares closed 44% higher at a value of $24.48 on their first day of trading in March in New York, bringing the value of the company to $28bn.
Following the float, Snap raised $3.4bn, making it the richest technology company listing in the US since Facebook in 2007.
At the end of trading on Wednesday, shares closed at $22.98 and a further 23% in afterhours trading, which brought the stock to $17.65.