LOS ANGELES — After the biggest U.S. tech IPO in two years, it’s time for Snap’s second act.
Its first earnings report, due late Wednesday, will give investors a look at whether the Snapchat parent — best known for the app that overlays disappearing photos and videos with graphics — is holding onto users and advertisers as larger social networks copy many of its popular features.
Analysts polled by S&P Global Market Intelligence expect a loss of 20 cents a share, adjusted, on sales of $158 million.
User growth is key. Facebook and its Instagram and Messenger units have aggressively gone after Snapchat by cloning many of its most popular features, raising the risk that Snap’s growth will plateau — giving advertisers less reason to place ads on the platform.
Snap reported a user base of 158 million when it was preparing the IPO, and had warned that growth was cooling. Analysts polled by Yahoo Finance forecast growth of 7 to 9 million users. At the high end, that would translate to a 37% rise in daily active users, the metric Snap reports. Some are even more optimistic — Monness Crespi Hardt analyst James Cakmak is forecasting user growth will surge 42% from last year, to 173 million.
But there are doubters, and beyond more users, investors want to see some sort of a roadmap for how it plans to compete against Facebook, says Eric Kim, a general partner with Silicon Valley venture capital firm Goodwater Capital.
“They have to address it,” he says. Facebook, and its Instagram unit, “is a two-headed beast that’s going so aggressively against Snap’s core product.”
The other big question is whether Snapchat co-founder and CEO Evan Spiegel will be present on the earnings presentation, as some tech CEOs are.
“In the face of competitive pressures, it would be prudent for [Spiegel] to be on the call, and establish confidence in the investor community,” says Kim.
Snap hasn’t said one way or the other, and didn’t respond to a USA TODAY request for comment.
After a surge at its debut, Snap’s stock has lost some steam. The stock closed its first day of trading on March 2 at $24.48 and has hovered in the low $20s since. It closed Tuesday at $23.32. The company raised $3.1 billion, despite reporting losses of over $500 million on revenues of $400 million in 2016.
Competition for its youth demographic is fierce, though there are some signs it has been able to take those in stride.
In late 2016 Instagram cloned Snapchat’s popular Stories feature, which lets a group of videos and photos go out to specific friends for just 24 hours, and Facebook added it as well in March, to the Messenger app.
Facebook also doubled down and added the colorful augmented reality filters that were the hallmark of Snapchat, to jazz up photos by having fire come out of your mouth and the like.
But a Jefferies survey of 1,000 Facebook and Snapchat users indicates Snapchat is growing just fine. It found usage increased, with the highest rise in users over 25 years old.
Tuesday, Snap released several new features–including photos that still disappear–just not as quickly.
The photo lasts a lot longer than 10 seconds, in fact as long as you want it to, but once it’s closed, it still bites the dust.
The app also added two more features: the ability to create Snaps that loop, and a “Magic Eraser” to remove objects in a Snap.