Why Snap Stock Plunged Today

Markets Motley Fool

What happened

Continue Reading Below

Shares of Snap (NYSE: SNAP) are plunging today, down 12% as of 12:00 p.m. EDT, after the Snapchat operator reported second-quarter earnings. User growth fell shy of expectations and the company's net loss more than tripled.

So what

Revenue in the second quarter rose 153% to $181.7 million, shy of the $186.2 million in sales that the Street was expecting. That all translated into a net loss of $443 million, or $0.36 per share, also worse than the consensus estimate of $0.30-per-share loss.

Snapchat added 7 million daily active users (DAUs) during the quarter, bringing its global total to 173 million. Investors were looking for 175 million DAUs. Total expenses soared 236% to $630.7 million, easily outpacing revenue growth.

Now what

Continue Reading Below

Snap's DAU growth continues to lag, in part due to intensifying competition from Facebook (NASDAQ: FB) on all fronts. Instagram Stories DAUs overtook Snapchat's total user base a few months back, and Facebook's photo/video-sharing service is garnering new users at a much faster rate.

Snap did make progress on the monetization front, particularly in international markets. Average revenue per user (ARPU) in Europe rose to $0.39, while rest of world ARPU increased to $0.29. The company has also benefited from better pricing for hosting services, which totaled $106 million during the quarter ($0.61 per DAU globally). However, those hosting costs comprise over 70% of cost of revenue. Snap does not provide forward-looking financial guidance.

10 stocks we like better than Snap Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Snap Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 1, 2017

Evan Niu, CFA owns shares of Facebook. Evan Niu, CFA has the following options: long January 2019 $20 puts on Snap Inc. and long January 2018 $120 calls on Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.