Snap Inc (SNAP) Stock Tanks After 2Q 2017 Earnings Release

Snap Inc (NYSE:SNAP) 2Q 2017 earnings were released after closing bell tonight, and the company reported losses of 36 cents per share on $181.7 million in revenue. Consensus stood at non-GAAP losses of 14 cents per share, GAAP losses of 30 cents per share, and $189.5 million in revenue. In last year’s second quarter, the Snapchat parent reported $71.8 million in revenue and losses of 14 cents per share.

Snap 2Q 2017 earnings

Snap’s net losses widened to $443.1 million from $115.9 million in the year-ago quarter. Adjusted EBITDA loss widened to $194 million from $105.1 million last year. Cost of revenue rose to $152.1 million from $94.8 million last year.

The Snapchat parent said its daily active user base increased from 143 million in the year-ago quarter to 173 million this year, marking a 21% year over year increase. That came up short of the consensus, which was looking for a 23% year over year increase. Snap’s daily active user base grew 4% sequentially from 166 million in the first quarter.

Average revenue per use jumped 10% year over year from 50 cents in last year’s second quarter to $1.05 this year. The metric increased 16% sequentially from 90 cents in the first quarter. Hosting costs per daily active user grew to 61 cents from 55 cents in last year’s second quarter and 60 cents in this year’s first quarter.

Is engagement on Snap falling?

While Snap does release daily active user numbers, it doesn’t yet include engagement metrics in its earnings releases. However, Verto Analytics Founder and CEO Hannu Verkasalo said before Snap 2Q 2017 earnings were released that although they picked up a sequential increase in users, engagement began to slow. The firm said average time spent per Snap user fell 32% sequentially. Of note though, Verto only picked up a 13.2% sequential increase in users.

“Snap’s challenges will become increasingly important to track, as its main competitor Instagram continues to roll out new (and similar) features to the same user base,” Verkasalo warned. “… In addition to user attention, Snap will also have to battle for advertisers, who will ultimately side with the platform that has more solid and consistent user base and engagement in order to succeed.

After Snap 2Q 2017 earnings were released, the company’s stock tanked in after-hours trade, falling by 12% to as low as $12.15.

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