Welcome to the public markets, Snap Inc (NYSE:SNAP). Life here can be brutal.

SNAP stock is off a grueling 25% in after-hours trading following its first earnings report as a publicly traded company, which included a miss in user growth and revenues. Should these prices hold, Snap will wake up Thursday to all-time lows.

Wednesday’s losses were exaggerated thanks to a run-up ahead of the report. Credit that to a broad tech rally that has lifted everyone from Apple Inc. (NASDAQ:AAPL) to Amazon.com, Inc. (NASDAQ:AMZN) to Netflix, Inc. (NASDAQ:NFLX). But it looks like it will take some more time for Snap to get into the same league.

So what sent SNAP stock holders rushing for the exits?

Revenues came in at $150 million, which fell $8 million below the consensus estimate. But more importantly, user growth was underwhelming. Global daily active users (DAUs) hit 166 million, while the Street was looking for 167.3 million.

Snap also suffered a $2.2 billion net loss, most of which was due to stock-based compensation expenses.

Here are some of the other highlights of the Snap earnings report:

• Average revenue per user (ARPU) was 90 cents in Q1, up by 181% on a year-over-year basis. However, it suffered a sequential decline of 14%.
• The costs for hosting (on a DAU basis) came to 60 cents, down from 72 cents in Q4.
• SNAP also boosted capital expenditures, which went from $12.5 million in $18 million over the past 12 months.

Snap has only traded for a few months, so it hasn’t even had time to build up its longer-term technical averages. But SNAP stock crashed through any lines that did exist, plowing below its 8- and 20-day moving averages to its lowest point as a publicly traded company.

Snap’s Story Is Fading

UPDATE: But the technicals don’t really matter right now — the main issue is the growth story.

On that front, things aren’t encouraging, either.

Quarter-over-quarter growth in DAUs was a mere 5%. In fact, SNAP added only about 3 million users in North America and about 1 million in countries outside of Europe.

No surprise there. According to Snap’s S-1, there’s been erosion in the user base over the past year. The company has blamed this on “technical” issues, such as with the inauspicious launch of the Android app.

But it feels more like corporate spin. Let’s face it: Facebook Inc’s (NASDAQ:FB) Mark Zuckerberg has been taking a no-prisoners approach to battling Snap. This has involved essentially knocking off key features of the app as well as leveraging the Instagram platform. So far, so good for him — during the past year, Instagram’s Stories feature has added more than 200 million users, and likely is growing faster than Snapchat.

Facebook’s earnings report, in contrast, shows Zuckerberg is far from finished. He’s revamping Messenger, WhatsApp and the core Facebook app (such as making the camera the central focus).

So if Snap’s user base is blunted, it’ll be tough to maintain the still-lofty valuation of the stock price. And Snap could be relegated to a niche operator, making its fortunes look similar to those of Twitter Inc (NYSE:TWTR).

Finally, SNAP stock should be a cautionary tale about IPOs. They’re fraught with risk, and it can take some time for investors to understand the business mode.

In light of this, it’s best to be disciplined when investing in hot deals. As seen today, they can quickly go cold.

Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companies. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.