Snap falls to a record low as more users flee
It’s been an ugly Friday for Snap Inc.
Shares of parent company Snapchat tanked to a record low, dropping 11 percent to $6 per share in afternoon trading. That number is a far cry from its Wall Street debut at $17 per share last year.
The problem? The app keeps losing users. On Thursday, during the company’s third-quarter earnings call, it revealed that it lost 2 million daily users. This is the second straight quarter Snapchat’s user growth has fallen. The company now has 186 million daily users.
During the call, Snapchat CEO Evan Spiegel attributed its user drop to Android users, admitting that the company always prioritized its iOS users and only last year did it begin to rethink its app for Android.
Spiegel than touted a forthcoming app for those users that will result in “global growth.”
But Spiegel and his team may be a little too late. Last month as reported by FOX Business, two major Wall Street analysts already seem to be giving up on the messaging app. Both Citi and Evercore ISI cut their price target on the company’s shares in recent weeks.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SNAP | SNAP INC. | 16.54 | -0.20 | -1.19% |
Citi’s Mark May maintains a Sell rating on Snap shares with a price target lowered from $8 to $7, while Evercore ISI’s Anthony DiClemente maintains an Underperform rating on the stock with a price target lowered from $9 to $7.
May cited several reasons for his bearish stance, including near-term worries related to executive departures, poor user trends, operating losses and “concerning third-quarter guidance.” He added that the social media platform may need to raise new capital over the next two years if revenue growth continues to disappoint.
But even in spite of the recent downgrades, Snap was already hitting lows due to its drop in daily active users, which started late last year over its controversial redesign that wasn’t well received by its users.
Another big factor in Snap’s fall from grace is that tough competition has really set in from Instagram, which is owned by Facebook. Instagram launched its own “Stories” feature in 2016, essentially mimicking Snapchat’s claim to fame.
DiClemente said he believes that Snapchat has not done enough to differentiate itself since Instagram’s update.
Snapchat has gone from entertaining 191 million daily active users in the first quarter of this year to 188 million in the following period. May said he believes the daily active user base will continue to contract.
Lastly, turmoil in Snapchat’s executive suite hasn’t helped either. Last month, Imran Khan, the company’s chief strategy officer, announced plans to leave after three years. Khan now joins a growing list of executives who have left the company over the past year.
In May, both the chief financial officer and its top engineer exited the company, while its vice president of product announced his departure in January.