One of Silicon Valley’s more popular technology companies has failed to hit its growth targets.
Missing a revenue target by $4mil and growing its debt by almost $300mil aren’t the kind of stories that investors want to be viewing. And that’s been reflected in the app maker’s share price falling by 15%.
Snapchat only recently went public.
It’s an example of a technology company whose value is based on its potential to grow and gain users, rather than its revenue and profitability at the time of its float. You only need to look at the IPOs of Facebook and Twitter to see how initially, in both cases, shares dropped in value considerably. Whereas Facebook has managed to prove its profitability and gain investors’ confidence, Twitter is now seen as unable to grow further and question marks are emerging over its value.
What’s more, the Snapchat’s leadership isn’t too revealing on how it’s run, there’s uncertainty over its corporate strategy and other companies like Instagram and WhatsApp are immitating its “picture fading” USP.
The good news for Snapchat is that its user base is around the ages of 20-25, it experienced user growth in North America, and there’s plenty of space to grow: attributes that advertisers love.