Snap stock drops on weak guidance

CEO and co-founder of Snapchat Evan Spiegel

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Snap shares dropped in extended trading Tuesday after a disappointing revenue forecast raised concerns that the momentum the company built up over the first half of 2019 is fading.

The company, which is the maker of Snapchat, posted a slimmer-than-expected loss for the third quarter while exceeding expectations for user growth and revenue.

• Loss per share: 4 cents vs. 5 cents forecast by Refinitiv
• Revenue: $446 million vs. $435.1 million forecast by Refinitiv
• Global daily active users (DAUs): 210 million vs. 207 million forecast by FactSet
• Average revenue per user: $2.12 vs. $2.10 forecast by FactSet

Snap said revenue in the fourth quarter is expected to be $540 million to $560 million, a disappointment relative to expected sales of $555.4 million, according to Refinitiv. At the midpoint of its guidance range, sales in the fourth quarter would climb 41% from a year earlier.

Snap Chief Financial Officer Derek Andersen said the company gave a light forecast for the fourth quarter, because 2019 will include one less week between Black Friday and the end of the holiday shopping season, which is Snap's peak demand period.

"The way the calendar falls this year there's one fewer week of activity between those two holidays," Andersen told analysts. "That's a potential headwind for us, and the guide reflects that."

TechCrunch mistakenly published a story containing Snap's quarterly results early and the stock crashed as much as 11% before bouncing back after the press release hit. The stock settled down about 3% to $13.55 after hours.

"We are a high growth business, with strong operating leverage, a clear path to profitability, a distinct vision for the future, and the ability to invest over the long term," Snap CEO Evan Spiegel said in a statement. "We are excited about executing on the many opportunities in front of us."

Snap's user base grew to 210 million daily active users. This was the third quarter in a row of growth for the company, which saw its user base shrink from the first quarter through the third quarter of last year.

The company reported revenue of $446 million for the third quarter, up nearly 50% compared with a year prior. Snap reported a gross margin of 51%, up from 36% gross margin reported a year earlier.

Asked whether social video-sharing app TikTok is a friend or foe, Spiegel said the Chinese-owned company is a Snap developer partner and an advertising customer that serves a different role for social-media users.

"The value they provide their community is very different than the value we provide ours to really empower communications with real friends," Spiegel told analysts. "We're excited to continue deepening that partnership and continue working together."

After a rough 2018, Snap has bounced back in 2019, lifting the stock closer to its $17 IPO price from 2017. The shares sank as low as $4.99 on Dec. 21.

Disclosure: CNBC parent NBCUniversal is an investor in Snap.

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