Snap Inc.'s (SNAP) second-quarter results didn't show that its business is rebounding, which left Wall Street more than disappointed. 

The social media upstart missed expectations on all four of its most-watched metrics on Thursday. It posted a loss of 16 cents per share on revenue of $181.7 million, while analysts had hoped for a loss of 14 cents per share and $186.2 million in sales. Daily active users were 173 million, falling short of consensus estimates for roughly 174 million users. In light of Snap's recent sluggish user growth, Wall Street had thought average revenue per user (how much money it can squeeze out of existing users) might turn higher, but that number also came in lower-than-expected. ARPU for the quarter was $1.05 per user, while analysts were looking for $1.07. 

Shares of Snap were stumbling 10.9% to $12.26 on Friday afternoon, after briefly touching new all-time lows of $11.40 after-hours on Thursday. 

Following the results, analysts were divided on whether the miss was driven primarily by its competition with Facebook Inc. (FB) or simply slowing adoption of its ad products. Here's what they had to say about the quarter: 

Shebly Seyrafi, FBN Securities (Sector Perform, Price Target lowered to $15 from $17) 

"Although we see self-serve as a positive catalyst to ARPU (which grew by 16% Q/Q, or $.15, to $1.05 in FQ2), ~60% (more than double the level in FQ1) of SNAP's ads were delivered programmatically, and programmatic is near-term negatively impacting pricing. SNAP hopes to improve pricing over time through better targeting and stronger auction participation, but we expect the near-term impact from programmatic to be a negative catalyst to ARPU. An additional negative ARPU factor is increased competition from FB (O-rated), which as we noted drove ~10% Q/Q pricing declines from SNAP last quarter according to our checks. So we see one key positive ARPU factor near-term - self-serve - and two key negative ones - programmatic and increased competition with FB."

Stephen Ju, Credit Suisse (Outperform, PT reduced to $17 from $25) 

"Our estimates reset lower in the near-term, as we along with the Street will interpret management's commentary around Olympics and Election-driven accentuated seasonality for 3Q16 as a move to manage expectations. That being said with the recent release of the self-service platform on top of the API rollout late 2016, 60% of Snap Ad impressions were delivered programmatically, which was up by a factor of 2x QOQ - this suggests to us that the frictional forces against greater budget deployment

are starting to come off."


James Cakmak, Monness, Crespi, Hardt (Downgraded to Hold from Buy) 

"In short, the thesis has changed. What's unfortunate is that despite all the media frenzy over Facebook's (FB/Neutral) 'Snap-killing' features, we see the slower-than-expected ramp in revenue as largely self-inflicted...What's happened is that the priorities don't seem to be fully aligned with the company's strengths. To be sure, we're not downgrading because the quarter was off or numbers are coming down, we're downgrading because we don't believe the right prioritization is in place to reignite the growth in the manner the market expects. What's important to note is that user growth was actually decent for the quarter, hence the inability to adequately monetize is, by definition, self-inflicted. Snap's number one competitor is not Facebook, but rather Snap itself."

Scott Devitt, Stifel (Buy, PT lowered to $18 from $22) 

"Despite modestly falling short of sell-side expectations on DAU growth, we view the +7mm net adds as a healthy increase in users / engagement, potentially putting to rest some concerns that the success of Instagram is materially "stealing" users from Snap. In reality, both platforms appear to be winning users and time away from less engaging media / communication platforms and offline activities. Global ARPU of $1.05 came below our $1.12 estimate, as ad pricing came under pressure in 2Q as the mix of advertising shifted to the auction model due to adoption of the API platform and the introduction of self-serve."

Brian White, Drexel Hamilton (Buy, $30 PT) 

"Snap continues to grow at a rapid pace, introduce new innovations and roll-out compelling content; however, the company's reluctance to provide guidance is driving the Street to make unachievable forecasts...Given significant concerns around DAU, we believe the addition of approximately 7.3 million DAU's quarter-over-quarter is good enough given Snap's model...We believe the DAU metric is less relevant when evaluating Snap's overall results given that Snapchat users need a high-end smartphone and a high-speed mobile network to fully leverage the Snapchat platform."

Brian Wieser, Pivotal Research (Sell, $9 PT) 

"Snap reported decent 2Q17 results, with relatively in-line revenues vs. our forecast. Costs were higher than we expected, but then so too was usage, coinciding with the company's Map product launch. Commentary around like-for-like advertiser spending increases, new ad product launches and geographic expansion can also be viewed favorably. However, our overall financial model remains relatively unchanged post these results."

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