Almost two years after its IPO, Snapchat is still not profitable. Snap lost 241 million dollars in Q4 2019, despite revenue of 560.8 million which rose 44% in 2011 and EPS of 0.03 dollars in 2013. This results from the addition of 8 million daily users, up 3.8 % from 210 and 17 % year over year, to a total of 218.
The big problem was a one-time legal settlement of 100 million dollars, which led it to lose $49 million more than in the fourth quarter of 2018. This stems from a lawsuit by shareholders that Snap did not sufficiently reveal the impact of Facebook competition on its business. When people changed from Snapchat Stories to Instagram Stories, the IPO was hampered by slow user growth.
A Rough Q4
Compared with estimates, Snapchat had one mixed quarter which exceeded the EPS but fell short of sales. The forecast for Fact Set expected sales of $563 million and losses of $0.12 EPS. Estimates achieved a 568 million dollar deal in revenue and an EPS increase of $0.02.
After the announcement, Snapchat shares plunged more than 10 percent in after-hours. At $18.99 today, shares closed up 4.17%. That is up from a low of $4.99, when its user counting decreased under the Instagram Stories competition in December 2018. The price of the $17 IPO is now floating, but it’s always on its $27.09 post-IPO release.
Snap has given $450 million to $470 million, 224 million to 225 million subscribers, with a scaled-up sales target for the first half of 2020. The company’s CFO Derek Anderson said: “Our amount of adjusted EBITDA positive in the first quarter of 2012 was 42 million dollars a year, an increase of 93 million dollars relative to the last year.”
Q4 saw Snapchat ready many new products which could lead to marketing and hence advertising views. Cameos, allows users to glue a mask like a lightweight Deepfake onto an individual in an animated GIF. Bitmoji TV is a four-minute animation, which won’t run advertisements initially but could attract attention from Snapchat Discover.
In addition to the law, Snapchat approaches profitability but still has a way. He has succeeded in developing a strong correlation between his famous, monetizing chat feature and the stories and the material he will find where he can insert advertisements. The big question is whether the ephemeral messages in the center of Snapchat are more serious for Facebook, Messenger, Instagram, and WhatsApp. It could cut its costs and build revenues until it is sustainable in the long term if it can keep the market and hold its place where teens are talking.