Snap Inc. (NYSE:SNAP) unlikely to post profit in 2017

Snap Inc. (NYSE:SNAP) unlikely to post profit in 2017

Snap Inc. (NYSE:SNAP) investors will not be in for huge returns – at least in 2017 – as statistics indicate that the young technology company will be closing 2017 without posting profits.

Revenue growth for Snap Inc. (NYSE:SNAP) will be lower than expected due to an increasingly saturated user market, unpredictable effects of the app redesign, and weakening ARPU from a switch in pricing mechanism. While the company has expanded into the Chinese markets, this single positive development will not be enough to save Snap Inc. (NYSE:SNAP) especially since it will face strong competition from local giants.

Since its IPO in March of this year, Snap Inc. (NYSE:SNAP) has been continuously struggling to meet up with its earnings expectations and has failed to generate positive net income. Despite having four official product lines, Snap only successfully monetizes Snapchat through procuring advertising revenue.

With most Snapchat users concentrated in North America and Europe, the firm has had trouble expanding abroad due to censorship and connectivity issues, although Tencent’s recent acquisition of 12 per cent of shares has generated speculation of a partnership which could help Snap penetrate previously untapped Chinese markets.

On another note, the company wrote off $39.9 million of inventory in Q3 2017 related to their Spectacles product line (a supposed complement to the popular Snapchat app), which was considered a massive failure. Leadership has frequently stated intentions to delay monetization of products and focus primarily on driving user engagement, regardless of cost. In fact, R&D and general and administrative expense, potentially related to the development of the Spectacles product (which was predicted to drive user engagement but failed), were 538% and 785% of revenue respectively in Q1, 2017.


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