Snap, Projected To Lose 2 Billion This Year, Lost More Than That In The First Quarter

Written by Felix Richter, Statista.com

-- this post authored by Felix Richter with content added by Econintersect

As the dust settles on what was arguably the hottest IPO of the past few years, both investors and analysts haven't quite decided what to make of Snap.

Until last week, the company behind popular messaging app Snapchat had received predominantly negative ratings from Wall Street’s analysts causing its share price to trend downwards for large parts of March. Last Monday however, the quiet period for the banks directly involved in Snap’s IPO ended and a slew of positive ratings hit the airwaves, causing the company’s stock price to recover from its mid-March low of $18.90.

Despite the different opinions on whether or not Snap’s shares are a good investment at the current price, there is one point that all analysts seem to agree on: Snap (NASDAQ:SNAP) is going to lose money for the foreseeable future. According to consensus projections gathered by Fortune, this year could turn out to be especially loss-laden for the self-proclaimed camera company. On average, Wall Street analysts expect Snap to lose $2 billion this year on roughly one billion in revenue. Even for tech company standards, that is a lot. Amazon (NASDAQ:AMZN) for example, a notoriously unprofitable company in its early years has never posted a loss as high. The company’s highest annual loss was $1.4 billion in 2000.

This chart shows analysts' predictions for Snap's revenue and net loss in 2017.

You will find more statistics at Statista.

Econintersect added content

When we last reported on Snapshat three weeks ago this was what we said (along with the first chart below):

The following chart shows the comparative performance of Snap (blue) and Facebook (green) since the first day of trading for Snap (02 March 2017). So far Facebook stock has far outperformed Snap.

(Click on image to enlarge)

Since 26 April the story has continued. After the "touting" discussed in the earlier part of this article, SNAP rallied strongly from a low below 20 (11.7% below to the IPO) to above 23 (>15% gain in 2 weeks). Then the earnings announcement on 10 May delivered a dose of reality: $2.2 billion loss for Q1 2017! This is more than the first part of the article projected for the entire year. The stock tanked by more than 25% on the day. See chart below. Also note that in the subsequent week SNAP has rebounded to gain back about half that one-day drop. The SNAP hopeful are still out there.

(Click on image to enlarge)

Here is a summary of the first quarter report from CNBC:

The numbers

• Revenue: $150 million reported vs. $158 million expected by a Thomson Reuters consensus estimate.

• Global DAUs: 166 million reported vs. 167.3 million expected by StreetAccount.

• ARPU: 90 cents reported vs. 90 cents per share expected by StreetAccount.

• Loss of $2.31 a share including compensation expenses.

• Analysts at Thomson Reuters estimate an adjusted loss of 20 cents per share, wider than the 19 cents expected.

That's compared with revenue of $38.8 million in the year-ago period.

Amid trouble at Facebook and Google, unprofitable underdog Snapchat aims for engagement

As the company behind the viral ephemeral messaging app and Spectacles glasses, Snap's IPO was the biggest technology offering since Alibaba.

And it's growing at an extraordinary rate: Revenue rose 286 percent year over year in the first quarter. Daily active users rose 36 percent from the year-ago period, and average revenue per user grew 181 percent.

More than 3 billion Snaps were made daily in the first quarter, the company said, up from 2.5 billion in the third quarter of 2016. Users spent an average of 30 minutes a day on Snapchat, the company's chief strategist, Imran Khan, said on the conference call, and cited Nielsen data showing that many Snap users could not be reached by traditional TV channels.

So investors are staying with SNAP as a growth story even though positive earnings seem far in the future, if ever. But if the earlier higher growth rates do not return and the slowing growth rates of the last 3 quarters is the new pattern for SNAP, how long will investors continue to support the stock price?