Snap Misses 1Q Revenue Estimates Following App Redesign

Shares of Snap Inc hit a new low after the social media firm released disappointing financial results. The results indicated that Snapchat had lost the confidence of users with the audience dipping in numbers in recent weeks. Part of the reason is the redesign of the app that has backfired. The first major redesign was carried out last year in November and this year there was a couple of updates.

Users have however shown displeasure with the redesign with some saying the changes are not necessary but only make the app harder to use. On change.org a petition has been started urging the disappearing message firm to get rid of the update has received signatures numbering over 1.2 million.

App redesign

“It is not clear to us why the app redesign – the first product Snap ever tested at scale – was rolled out broadly, and we are even less clear on why it hasn’t been more aggressively rolled back already,” Lloyd Walmsley an analyst at Deutsche Bank told Reuters.

Executives of Snap acknowledged that the redesign had hurt the financial results while also saying they would stick to the plan since the aim is to broaden the popularity of the app with advertisers and users. In an earnings conference call the chief executive officer of Snap Inc, Evan Spiegel, said that the update had resulted in the creation of new opportunities and the firm would continue its efforts of refining and improving the app.

Stock downgrade

After the results at least 13 Wall Street firms downgraded the stock. The most bearish of the brokerages was MoffettNathanson which has set $7 as the price target. Morgan Stanley on the other hand set a price target of $8 while Piper Jaffray and Deutsche Bank were more optimistic as they had a hold rating. Currently shares of Snap are trading at around $11.

While analysts had been expecting the number of daily active users of Snapchat to increase to 194.15 million the actual figure was 191 million for the quarter that ended on March 31.

The disappearing-message firm is now also applying an auction system that is software-based to sell ads. While this has made ads cheaper and the process of buying the ads easier, in the short term revenue has fallen. Revenue came in at $230.7 million against projections of $244.5 million. The cash burn rate of Snap fell by 13% quarter-over-quarter to hit a figure of $222 million.

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