Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Snap Stock Dropped 13% in August

By Evan Niu, CFA - Sep 4, 2018 at 3:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Second-quarter results that showed its first decline in users knocked Snap stock down a notch.

What happened

Shares of Snapchat parent Snap ( SNAP -0.73% ) dropped 13% in August, mostly due to the company's second-quarter earnings results. Snap reported its first decline in daily active users (DAUs), which rattled investors.

So what

Snapchat's sequential user growth had been decelerating for quite some time, so it wasn't entirely unsurprising that the ephemeral photo messaging platform lost 3 million DAUs in the second quarter, or about 2%. That also included losing 1 million DAUs in North America, its most important market, which represented nearly 70% of revenue in the quarter. CEO Evan Spiegel blamed the trend on "disruption caused by our redesign." Snap had rolled out a controversial redesign earlier in the year that had sparked widespread backlash among its most loyal users.

Snapchat logo

Image source: Snap.

Snap ended up posting a net loss of $353.3 million, or $0.27 per share, even as revenue jumped 44% to $262.3 million.

Now what

One silver lining was that Snap started issuing financial guidance for the first time, which may be thanks to hiring new CFO Tim Stone. The company expects third-quarter revenue to be in the range of $265 million to $290 million, which should translate into adjusted EBITDA of negative $185 million to negative $160 million. That top-line forecast would represent growth of 27% to 39%, which means revenue growth is also decelerating at a time when the user base may be peaking.

Shares of Snap have tapped a new all-time low in trading today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Snap Inc. Stock Quote
Snap Inc.
$47.26 (-0.73%) $0.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.