Shares of Snap, the parent company to Snapchat, took a nose dive after the social media company missed Wall Street’s first-quarter expectations and posted a massive $2.2 billion loss.
Snap’s stock opened at $17.96 per share Thursday, which was down 22% from Wednesday, giving it a market value of approximately $20.7 billion (compared to $26.6 billion at market close Wednesday).
Though Snapchat added 8 million daily active users in its first quarter, which is a 36% increase year over year, it was only 5% more from the prior quarter. $2 billion of Snap’s net loss of $2.2 billion was attributable to stock-based compensation, with $750 million going to CEO Evan Spiegel.
But don’t plan the funeral just yet, some analysts are still optimistic on the company’s potential.
“Our thesis is intact,” Cowen & Co. analyst John Blackledge wrote in a research note. “We expect product innovations to drive/retain users and expect Snap to monetize the platform over time, as the company is under-monetized relative to peers across all markets and is really just turning on the lights in Europe and [the rest of the world].” Blackledge reduced his price target on Snap (from $26 to $21 per share) and maintained an “outperform” rating.
RBC Capital Markets’ Mark Mahaney also showed confidence in the company stating that Snap’s Q1 results were not “thesis-changing.” Mahaney’s estimates were left unchanged, with a price target of $31 per share and an “outperform” rating.
“Snap has become an innovation leader –- for both consumers and advertisers — in the single fastest advertising medium today: mobile,” Mahaney wrote in a note. “We believe that if it sustains its current level of innovation, it can sustain premium growth for a long time and scale to profitability.”
However, its not all sunshine and rainbows on Wall Street, MoffettNathanson’s Michael Nathanson changed his “sell” rating, lowering his price target from $15 to $11 per share arguing that the rapid deceleration in Snapchat’s user growth “confirms our view that Snap is highly penetrated amongst its core target demos and will hit a ceiling on [daily active user] growth sooner than the stock is pricing in.”