China’s Tencent Snaps Up Shares of Snapchat

Snap is hoping to gain back some of its crackle and pop.

The company that owns the disappearing social media app Snapchat failed to meet analyst expectations in the third quarter, and investors were not pleased.

On Tuesday Snap’s shares fell 20% as it reported increased losses, and revenue that was weaker than analysts expected. The company revealed  its quarterly losses more than tripled to $443 million. Revenue was up 62% to $208 million–analysts had expected $237 million, according to the Wall Street Journal.

Snapchat gained only 5 million new users in the quarter, reportedly its lowest user growth since the company was founded in 2011.

The vanishing messaging and video app site was once the darling of Wall Street. It went public this winter to great fanfare, raising a staggering $3.4 billion in one of the biggest public offerings in years. But it’s encountered difficulties since listing on the New York Stock Exchange in March.

Analysts speculate it’s facing problems competing for advertising dollars in an environment dominated by tech heavyweights Google and Facebook. In recent months Snap has also had at least one expensive dud–video recording glasses called Spectacles, which cost the company $40 million in the quarter due to lack of sales.

TenCent snaps up more Snap

China’s Tencent, the Internet services giant, swooped in and purchased an additional 12% of the company in after hours trading.

Tencent is one of the top tech companies in China, and ranks globally. It owns the WeChat messaging app which boasts nearly 1 billion users, as well as social networks Moments, Mobile QQ, QQ and Q-Zone.

Tencent is also a global leader in online gaming. It owns Riot Games and Supercell.

Tencent, an early investor in Snapchat, has frequently purchased stakes in other startups, including Tesla and Lyft.

Facebook and Twitter going strong

The past week has been a big one for social media companies as they’ve reported their third quarter earnings.

Older companies including Facebook and Twitter showed strong revenue growth, while Twitter announced an important change to the way users communicate on its platform.

More Space to Tweet

Twitter expanded the limit for tweets to 280 characters, double what it’s been since launching in 2006. The social media platform is making changes to retain and gain more customers, particularly those who might feel constrained by the older character limits.

Twitter released this graphic to explain things a bit better:

 

Source: Twitter

One interesting note: Users in China, Japan and Korea aren’t getting the extra space, as they have no problem with brevity, according to Twitter.

Twitter also added four million new users, and saw its revenue increase about 3% to $590 million, compared to the previous quarter, according to its quarterly report.

Great big revenue growth

Facebook reported sales growth that was off the charts. It took in revenue of $10.3 billion in the third quarter, up a whopping 47% compared to the same quarter a year ago. That beat what analysts had expected for the company by nearly 5%.

Shares of Facebook reportedly fell about 2%, following the news, as the company also said its operational expenses would increase by 45% in the coming year.

These earnings came in spite of recent rocky times for the global social media platform. Facebook representatives testified before Congress last week about the role the company played allowing Russian operatives to plant false campaign information in highly targeted ads on the social media platform during the 2016 election cycle in the U.S.

Mark Zuckerberg, the company founder, addressed the controversy in a conference call with financial analysts last week.

“We’re working with Congress on legislation to make advertising more transparent,” Zuckerberg said. “We’re also working with other tech companies to help identify and respond to new threats, because as we’ve now seen, if there’s a national security threat involving the internet, it will affect many of the major tech companies.”

Top takeaways:

  • There was lots of news in the social media sector.
  • Snap, the company that owns Snapchat, saw earnings fall.
  • China’s Internet giant Tencent snapped up 12% of Snap.
  • Twitter and Facebook announced solid earnings.
  • U.S. Tweeters can now tweet 280 characters (up from 140).

Read more: Snapchat Obsessed? Check Out Social Media Mania ETF






Author:
Jeremy Quittner is the financial writer for Stash.



Disclaimers
This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.