Why Snap Shares Tanked after 2Q17 Results
Snap shared plummeted in aftermarket trading
Snap’s (SNAP) fiscal 2Q17 numbers showed another failure for the social media company, and shares tumbled ~15% in aftermarket trading. As we discussed in the first part of this series, Snapchat’s user growth has slowed down, facing pressure from Facebook’s (FB) Instagram.
Snapchat added only 7.3 million daily active users in 2Q17, reaching 173 million and growing only 4.2% from fiscal 1Q17. The app saw 5% QoQ (quarter-over-quarter) growth in fiscal 1Q17.
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Snapchat’s daily active users grew by a robust 17.2% QoQ in 2Q16, when it added a whopping 21 million new users. However, since then, it hasn’t been able to see double-digit QoQ growth. Snap investors will be hoping that the company doesn’t go the way of Twitter (TWTR), which has been on a downward trajectory in user growth.
Silver lining for Snap
Still, Snapchat did manage to add 4 million users in the North America region, compared with 3 million net user additions in each of the previous two quarters. Snap also boosted its ARPU (average revenue per user) meaningfully in the rest of the world, from $0.19 per user in fiscal 1Q17 to $0.29 per user in fiscal 2Q17.
Meanwhile, Snap revealed in its earnings call that it earned $5.4 million in “other revenues,” mostly through its camera sunglasses. As of Monday, August 14, Snap’s employees can finally sell their shares after the expiration of their lock-up period. If investors are in a hurry to sell, Snap shares could plummet even further.