Motley Fool
0
All posts from Motley Fool
Motley Fool in Motley Fool,

Why Snap Shares Plunged Today

What happened

Shares of Snapchat operator Snap (NYSE: SNAP) have plunged today, down by 16% as of 10:40 a.m. EST, after the company reported third-quarter earnings that fell short of expectations.

So what

Revenue in the third quarter rose to $207.9 million, while the company's net loss more than tripled to $443.2 million, or $0.36 per share. Daily active users (DAUs) crept higher to 178 million. Average revenue per user jumped 39% to $1.17, while hosting costs per DAU came in at $0.68.

Image source: Snap.

That did help gross margin slightly, but total costs and expenses rose nearly 160% to $670 million. The company also took a $39.9 million charge related to Spectacles inventory and purchase commitment cancellations.

Now what

Snap also announced that it was currently in the process of overhauling its core Snapchat app in order to address long-standing criticisms that it is hard to use. That's a pretty risky move, and CEO Evan Spiegel said that Snap expects the changes to be "disruptive to our business in the short term." The company also said it is developing an algorithmic solution for content discovery, similar to its social media peers, while it continues to make progress with improving its Android app, which has long suffered from performance issues.

Unfortunately, Snap does not provide investors with any type of forward-looking guidance, so aside from third-party analyst estimates shareholders are left in the dark as far as what to expect for the fourth quarter. Shares rebounded slightly after Chinese tech giant Tencent disclosed that it had accumulated a 12% stake in the company.

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 November 6, 2017

Evan Niu, CFA has the following options: long April 2018 $17 puts on Snap Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.