Snap forecasted sales that fell short of analysts’ estimates, saying that the Ukraine war will continue to put pressure on its performance.
Snap Inc. reported user growth that beat analysts’ estimates, sending shares up in after-market trading. The Snapchat app, popular with young people for sending disappearing messages and augmenting videos with special effects, drew 332 million daily active users, 18% more than in the same period last year, compared to the 330.5 million estimate, with growth primarily coming overseas. That stands in contrast to its biggest competitor, Meta Platforms Inc., where growth has stagnated.
“Among the peers, it is still healthy,” said Mandeep Singh, an analyst at Bloomberg Intelligence. Shares gained as much as 12% in after-hours trading.
Still, the company is facing some short-term difficulties in the quarter. Snap forecasted sales that fell short of analysts’ estimates, saying that the Ukraine war will continue to put pressure on its performance. First-quarter sales increased by 38% to $1.06 billion, the company said on Thursday. That narrowly missed analysts’ expectations for 1.07 billion.
Looking ahead, the company predicted revenue growth of 20% and 25% for its second quarter. Analysts were predicting 28% sales growth.
“While we are pleased with our progress given the macroeconomic environment, we also recognize that we have a significant amount of work to do to realize our long-term opportunity,” Chief Executive Officer Evan Spiegel said in prepared remarks.
The company also posted a net loss of $360 million, due in part to an investment loss, after notching its first profitable quarter at the end of last year.
Derek Andersen, Snap’s chief financial officer, told analysts in prepared remarks that revenue growth during the quarter initially exceeded the company’s expectations, until a large number of advertisers suspended their campaigns following Russia’s invasion of Ukraine. Most of the campaigns resumed within 10 days, he said. Andersen said he believed the war in Ukraine would continue to impact marketing budgets.
But other issues have also bedeviled the Santa Monica, California-based social network, whose stock is down about 50% over the last twelve months. New rules from Apple Inc. that require all apps to get smartphone user’s permission to be tracked online have made it more difficult for advertisers to measure and manage their ad campaigns.
Then there’s the ongoing rise of the short-form video service TikTok, with 2.91 billion monthly active users, owned by China’s ByteDance Ltd., which has sapped the time and attention of its core demographic of young teens. Snap’s competing video services, Discover and Spotlight, also feature short-form video from users and advertisers.
Snap is the first major advertising-supported social media company to report first-quarter earnings. Similar factors could show up in the reports of Meta Platforms Inc., Pinterest Inc, Twitter Inc., and Alphabet Inc., all reporting next week. Pinterest and Meta fell following Snap’s results. Andersen also noted that supply chain disruptions and rising interest rates affected Snap’s results.
Next week, at its annual Partner Summit, Snap will unveil the latest developments in augmented reality — which is also an area of focus for one of its chief rivals, Meta. Snap said that over 250 million users engaged every day with augmented reality tools, such as filters they can place over camera images, adding such things as key historical figures at culturally important landmarks.
“We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate,” Spiegel told investors. “What began as an application for visual communication has evolved into a leading augmented reality platform where creators are building unique and innovative AR experiences.”
Source: indianexpress.com