This week, Snap Inc. reported earnings for the first time as a publicly traded company. To put it lightly, things did not go as planned for investors of the young darling tech company.
Investors were hoping for a significant earnings beat, as is common in the first few earnings releases following an IPO, with improved user growth and revenue numbers. Unfortunately, this was not the case for Snap out of the gate.
Snap announced a loss of $2.2 billion during the first quarter, with revenues missing analyst expectations, and user growth beginning to slow. Shares of Snap ended yesterday down 21.5%, and as of noon EST today, rallied 1.4%.
The market simply has set a very high bar for Snap, with the IPO priced at extremely high valuation multiples seen by only a few other companies such as Facebook or Twitter. While Facebook shares did drop post-IPO, the company has shown stability with its user growth and in particular its growth in revenue generation, two things which appear to be blatantly lacking at Snap.
With other companies such as Facebook introducing “Snap-like” features to their existing platforms, and the hype surrounding Snap appearing to die down, investors may see the tech company’s valuation dwindle to more appropriate levels over the near-term as the market attempts to correctly price the company’s long-term prospects and growth rates according to new information.
One thing is for certain: Snap investors are going to need to see a better performance at the company’s next quarterly release. For a growth name like Snap, quarterly numbers are even more important due to the evolving nature of the business, and will likely be treated as such.
