Life as a public company has been rough for Snap Inc.
Only three months into the company’s public debut, Snap shares returned to their $17 opening price on Thursday after falling 5%. Today they’re struggling to pick back up, gaining back less than 3% in afternoon trading.
The first big blow to Snapchat's parent happened after the firm's first-ever quarterly earnings filing on May 11, when Snap surprised investors and analysts by revealing losses per share of 20 cents, worse than analysts expected. That translated to $2.2 billion in losses for the quarter. Shares took a beating that day, closing down more than 21%.
Among its social media predecessors, Snap is the youngest to go public. When Facebook hit the public market in 2012, it was 8 years old. Twitter had been around for 7 years when it went public in 2013. Snap was 6 years old, and its youth has implications that make for a tough pitch to investors.
The app-based social media platform has been struggling to deliver on key metrics of engagement, user growth and app downloads – figures that trail those of its more-mature social media counterparts. For a company still in the red, these growth figures help tell investors that the firm's on a path to profitability.
Snap reported 166 million daily active users, below the 168 million users analysts were expecting. Snap's crowd, a mix of mostly teenagers and millennials, has also been hard to sell to advertisers. The company revealed average revenue per user of 90 cents – trailing Twitter’s $4.70 per-user revenue and Facebook’s figure of nearly $20.
Snap’s advertising presence, however, is also young. It’s been less than three years since the platform saw its first paid ad, and the firm's now nabbing $150 million in quarterly revenue, nearly triple the figure from a year ago.
Last month, the company stepped up efforts to help boost the figure even further, offering discounts and bonuses to advertisers for the first time ever and introducing a machine-learning algorithm to help advertisers target users deemed more likely to install their app.
For now, analysts are still mixed on the stock. Average analyst price targets are pinning Snap shares at $20.90, but it seems the bearish calls are weighing heavy on investors and analysts. Earlier this month, Citigroup downgraded Snap from buy to neutral.
Snap's expected to release earnings again in early August.
