Why Snap Stock Dropped 13% in August

What happened

Shares of Snapchat parent Snap (NYSE: SNAP) 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.

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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.

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.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.