Snap disappoints with fourth-quarter revenue guidance, sending shares down

(Reuters) - Snap Inc SNAP.N on Tuesday forecast fourth-quarter revenue largely below Wall Street estimates, sending its shares down 5% in after-market trading.

FILE PHOTO: A woman stands in front of the logo of Snap Inc. on the floor of the New York Stock Exchange (NYSE) while waiting for Snap Inc. to post their IPO, in New York City, NY, U.S. March 2, 2017. REUTERS/Lucas Jackson

The parent company of photo messaging app Snapchat estimated fourth-quarter revenue of $540 million to $560 million, the midpoint of which was below analysts’ estimate of $555.4 million, according to IBES data from Refinitiv.

The outlook overshadowed Snap’s third-quarter results released on Tuesday, which showed larger-than-expected growth in daily active users. Wall Street also glossed over Snap’s estimate it would reach profitability in the fourth quarter, as measured by earnings before interest, tax, depreciation and amortization (EBITDA).

On a conference call with analysts, Snap Chief Financial Officer Derek Andersen said the company’s peak advertising demand period, which runs between the Black Friday and December holidays, had one fewer week this year, and was reflected as a “headwind” in the guidance.

Snapchat, popularized by its photo visual effects which allow users to change gender in photos or add a dog filter over their face, had 210 million daily active users in the third quarter ended Sept. 30, up from 203 million in the prior quarter.

It had 186 million users in the year-ago quarter.

The number, a widely watched metric by investors and advertisers, was above analysts’ average estimate of 206.6 million, according to IBES data from Refinitiv.

Snapchat faces competition from several other apps for the coveted younger demographic, including Facebook Inc's FB.O Instagram and newer apps like TikTok, used to create and share short lip-sync, comedy and talent videos.

Investors are still cautious about Snap, given the company’s tumultuous past and “irregular user-engagement record,” said Haris Anwar, an analyst at financial markets platform

“A slight miss on expectations would be enough to hurt the stock and revive the old memories,” he said.

Revenue, which the company largely makes by selling advertising on the app, jumped about 50% to $446.2 million in the third quarter and beat an average analyst estimate of $435.05 million.

Average revenue per user jumped 33% to $2.12 during the quarter from a year earlier.

In remarks released before the conference call with analysts, Snap Chief Executive Evan Spiegel said this year’s growth has put the company “on a clear path to Q4 adjusted EBITDA profitability.”

The company’s net loss narrowed to $227.4 million, or 16 cents per share, from $325.1 million, or 25 cents per share, a year earlier.

Excluding items, Snap posted a loss of 4 cents per share in the quarter. Analysts had expected a loss of 5 cents per share.

Reporting by Akanksha Rana in Bengaluru and Sheila Dang in New York; Editing by Shailesh Kuber, Richard Chang and Chris Reese