Snap Shares Fall on Disappointed Earnings Beat

Snapchat’s parent company, Snap, reported its Q4 2019 earnings after the closing bell, on Tuesday this week. Unfortunately, the report showed the company missed Wall Street’s revenue expectations, indicating the company managed a series of strong quarters to turn around user growth numbers through most of the year.

These are, of course, the most important numbers from the report. However, the report also reveal how other earnings numbers compare against analyst expectations. This includes revenue of $561 million (versus the expected $562.9 million), adjusted earnings per share of $0.03 (versus the expected $0.01) and daily active users of 218 million (versus the expected 214 million). 

With that, the stock was down 13 percent. 

Of all the numbers reported, the growth in daily active users is also particularly important for Snap.  Last year, the company saw a decline in this metric: typically a near-certain harbinger of end times for social media companies.  However, the company was able to turn this around by introducing more augmented reality filters complete with a rebuilt version of its Android app. 

On top of all this, Snap also debuted a feature they call Instant Create. The feature went live in July and it allows advertisers to more easily create ad campaigns specifically for Snapchat.  Snap also released Snap Select to help advertisers embed ads into the app’s premium shows via Snapchat Discover.

Snapchat Discover is particular import as that section of the company performed especially well during Q4 of fiscal 2019.  Apparently, daily user time spent watching unique Snapchat Discover content increased by an astounding 35 percent year-over-year.  Daily viewing of Discover content among those over the age of 25 also saw impressive growth: up 60 percent on the year. 

But Snap continues to face growing competition particularly from TikTok, which has become the mobile platform of choice among Generation Z. This could put surmounting pressure on Snap over the next year but TikTok faces problems of its own—namely regulator belief that China could use the app to spy on users—so there is still much to speculate.