Why Snap Inc (NYSE: SNAP) stock is crashing

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Snap Inc (NYSE: SNAP) stock lost over 10.4% on 5th Feb, 2020 (as of 10:58 am GMT-5; Source: Google finance) as the company posted lower than expected results for fourth quarter of FY 19. The company’s net loss rose $49 million to $(241) million in Q4 2019, compared to the prior year. In 2019, the company had added 31 million daily active users, mainly due to the investments in the core product and improvements to the Android application. The company has recently completed the 2020 strategic planning process, and have aligned the teams and resources around the goals of supporting real friendships on Snapchat, expanded their service to a broader global community, invested in the AR and content platforms, and scaling revenue while achieving profitability in order to self-fund the investments in the future. The company’s Operating cash flow increased by $59 million to $(67) million in Q4 2019, compared to the prior year and free Cash Flow increased by $73 million to $(76) million in Q4 2019, compared to the prior year.

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SNAP in the fourth quarter of FY 19  has reported the adjusted loss per share of 17 cents, missing the analysts’ estimates for the adjusted loss per share of 12 cents, according to analysts polled by FactSet. The company had reported the adjusted revenue growth of 44 percent to $561 million in the fourth quarter of FY 19, missing the analysts’ estimates for revenue of $563 million. Daily-active users, a key measurement of the company’s popularity, rose 17% to 218 million while the analysts polled by FactSet had expected 214.74 million. The average revenue per user was $2.58, which shy of the $2.62 forecast by FactSet.

Further, In North America, DAU grew by 9% year-over-year, up from 5 million or 6% in the prior quarter. In Europe, DAU grew by 12% year-over-year, up from 6 million or 9% in the prior quarter. In Rest of World, DAU grew by 36% year-over-year, compared to 13 million or 28% in the prior quarter. In North America, revenue grew 42% year-over-year in Q4, compared to 52% in Q3, while ARPU grew 31% year-over-year, compared to 43% in Q3. In Europe, revenue grew 47% year-over-year in Q4, compared to 36% in Q3, while ARPU grew 31% year-over-year compared to 24% in Q3.

For the first quarter 2020, the company expects sales to be in the range of $450 million to $470 million, which is roughly in line with the $461 million forecast by FactSet.

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