Snap earnings show continued strong user growth, but stock slides in late trading
Snap Inc. shares went on a jagged ride Tuesday afternoon despite an earnings report that showed continued strong gains in users and revenue.
Snap announced that active users increased by 7 million, a better-than-expected gain following Snapchat's best quarter for user growth in its history. The company revealed third-quarter losses of $227.4 million, or 16 cents a share, on revenue of $46.2 million, up from sales of $298 million in the same quarter a year ago. After adjusting for stock-based compensation and other expenses, Snap reported losses of 4 cents a share, better than an adjusted loss of 12 cents a share in the year-ago quarter.
Analysts on average expected Snap to report adjusted losses of 5 cents a share on sales of $435 million, while adding about 4 million new daily active users, according to FactSet. Snap stock, which closed with a 3.9% decline at $14.01, initially dropped more than 7% in after-hours trading, then quickly moved to gains, but then fell again to losses of more than 5%.
Snap's stock has been one of the biggest success stories in a mixed year for tech, rising more than 150% so far in 2019 as Snapchat has defied expectations that its user base would shrink. Executives have credited a redesigned mobile app for Alphabet Inc.'s Android operating system, which is more similar to the experience that Snap offers on its Apple Inc. iOS-based app.
In addition to the revamped Android app, Snapchat also introduced new filters in the second quarter that allowed users to see what they might look like at different ages, which was believed to be the spark for record user growth in that quarter. Many analysts were hoping that Snap's push into social gaming could continue that momentum in the third quarter.
"We believe that while Facebook's audience and broader business has evolved in such a way that gaming distribution is no longer a meaningful point of investor conversation, Snap is uniquely positioned to recreate a similar social gaming platform business on mobile," Evercore ISI analyst Kevin Rippey wrote in a September upgrade of Snap stock, harking back to a time when Facebook Inc. brought in users and cash through popular social games on its platform such as Zynga Inc.'s "Farmville."
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