Snap Inc reported quarterly sales that missed Wall Street estimates, a sign that the photo-sharing app is finding it harder to carve out a niche in the crowded digital-advertising market.
Shares slumped 12% in extended trading.
Fourth-quarter sales totaled $560.9 million, the company said Tuesday in a statement. That was less than analysts’ average projection of $562.9 million.
Snap’s first-quarter revenue forecast also came in slightly below expectations.
The owner of the Snapchat app last year executed a turnaround after a much-criticized redesign, a series of executive departures and job cuts, and a rocky 2017 initial public offering.
The company added more users than expected in the fourth quarter, as people downloaded a better Android version of the photo chat app, but it still isn’t profitable – Snap reported a quarterly and annual net loss, including a $100 million payment to settle a lawsuit related to the IPO.
Before the report, investors had been optimistic about the company’s prospects, and the stock had gained about 16% this year.
“We are working hard to scale our revenue so that we are able to self-fund our investments in the future,” chief executive officer Evan Spiegel said in prepared remarks to investors.
The stock dropped as low as $16.08 in late trading following the earnings report, after closing at $18.98 in New York earlier on Tuesday.
Snap operates in a competitive digital-advertising market, where Google and Facebook Inc. capture the bulk of sales. It also faces the emergence of new competitors for young social-media users, like ByteDance Inc’s TikTok.
Still, Spiegel argues Snap has an opportunity to sell advertisers access to a younger audience.
The Santa Monica, California-based company said on Tuesday that it had 218 million daily active users in the fourth quarter, beating the 214.2 million average analyst estimate. Besides the Android improvements, the company has been drawing more users in with creative photo tools, such as filters that manipulate the age of your face on a sliding scale.
The company’s net loss in the recent period, including the legal-settlement charge, was $240.7 million, or 17 cents a share. Snap forecast first-quarter revenue of $450 million to $470 million. Wall Street was looking for $463 million, according to data compiled by Bloomberg.