Snap reports a ‘challenging’ quarter but the stock still rises

CEO of Snap Inc. Evan Spiegel walks to a morning session at the Allen & Company Sun Valley Conference on July 07, 2021 in Sun Valley, Idaho.

When it reported first-quarter results on Thursday, it missed Wall Street expectations for profit and sales, and forecast disappointing revenue growth in the current quarter. Daily users grew 18% annually, more than expected.

At one point, the company was down about 4%, but recovered to rise over 7% at one point.

The key numbers are here.

• Earnings per share: A loss of 2 cents versus expected earnings of 1 cent, according to a Refinitiv survey of analysts
• Revenue: $1.06 billion versus expectations of $1.07 billion expected, according to Refinitiv
• Global Daily Active Users (DAUs): 332 million versus 330 million expected, according to StreetAccount, up 18% year-over-year
• Average Revenue per User (ARPU): $3.20 versus $3.25 expected, according to StreetAccount, up 16.8% year-over-year

The first quarter of the year was more challenging than the company had anticipated, according to a prepared statement from the CEO.

Advertisers who paused their campaigns after the Russian invasion of Ukraine were blamed by Spiegel for some of the issues that occurred during the quarter.

The company said it expected revenue to rise between 20% and 25% in the June quarter. It predicts daily users to be around .

In the second quarter, the company expects adjusted EBITDA to fall between breakeven and $50 million.

The company reported a bigger net loss and less free cash flow on an annual basis during the quarter ended in March.

Supply chain disruptions, labor shortages, inflation, and the impact of rising interest rates are some of the conditions affecting advertising customers.

Andersen said in his prepared remarks that a challenging operating environment could cause customers to pause their campaigns or reduce advertising budgets.

Apple's privacy change in 2021, which makes it harder to target and measure ads on phones, is one of the challenges facing the company. The tool that the company created to improve the issue now accounts for 90 percent of the company's direct response advertising revenue.

The investment that went public last year resulted in a $92 million loss for the company.

In the first quarter, the stock of the cloud software vendor fell as investors pulled out of high-growth tech. As part of a $100 million round, Snap invested in the company, but never disclosed the details of its holdings.