Snap’s stock plunges 12% as its turnaround hits a speed bump

Once written off as doomed just a few years ago, Snapchat is now consistently adding users and growing its business in a highly competitive market. But that may not be enough to appease investors after a banner year on Wall Street.

On Tuesday, shares of Snapchat’s parent company, Snap, fell more than 10% in after-hours trading after posting slightly weaker revenue growth for the final three months of 2019 than analysts expected.

The company said revenue rose 44% from the year prior to $561 million for the quarter, missing Wall Street’s expectations. Snap’s net losses grew 26% to roughly $240 million, driven in part by a $100 million legal charge.

The sharp dip in share price represents a rough start to the year for a company that had been on a tear recently, finally trading above its IPO price of $17 a share. It had closed regular trading hours at nearly $19 per share on Tuesday.

In the years following its 2017 initial public offering, the company struggled to prove it could achieve a mainstream audience on par with rivals like Facebook and Instagram, both of which brazenly copied its most popular features. Snapchat also faced a backlash to a controversial redesign of its photo-sharing app in late 2017, which cost it millions of users.

Last year, Snapchat began adding users again. The platform added more than 30 million daily users in 2019, ending the year with 218 million daily active users, according to the earnings report. Debra Aho Williamson, principal analyst with eMarketer, said Snapchat’s user growth was “strong” last year and noted that marketers “want to engage with its youthful audience.”

But the social media market is only getting more competitive. Beyond Facebook and Instagram, Snapchat now faces competition from social network upstart TikTok. Any indication of weakness, even a slight miss on revenue, may be enough to make investors jittery.