UPDATE 2-Snap forecasts 4th-quarter revenue below expectations

Reuters
Updated

(Adds details from results, background)

Oct 22 (Reuters) - Snap Inc on Tuesday forecast fourth-quarter revenue largely below Wall Street estimates, sending its shares down 5% in after-market trading.

The parent company of photo messaging app Snapchat estimated fourth-quarter revenue of $540 million to $560 million, the midpoint of which was below analysts' estimate of $555.4 million, according to IBES data from Refinitiv.

The outlook overshadowed Snap's third-quarter results released on Tuesday, which showed larger-than-expected growth in daily active users. Wall Street also glossed over Snap's estimate that it would reach profitability in the fourth quarter, as measured by earnings before interest, tax, depreciation and amortization (EBITDA).

In remarks released before a conference call, Snap Chief Executive Evan Spiegel said this year's growth has put the company "on a clear path to Q4 Adjusted EBITDA profitability."

Snapchat, popularized by its photo visual effects which allow users to change gender in photos or add a dog filter over their face, had 210 million daily active users in the third quarter ended Sept. 30, up from 203 million in the prior quarter.

It had 186 million users in the year-ago quarter.

Snapchat faces competition from several other apps for the coveted younger demographic, including Facebook Inc's Instagram and newer apps like TikTok, used to create and share short lip-sync, comedy and talent videos.

The number, a widely watched metric by investors and advertisers, was above analysts' average estimate of 206.6 million, according to IBES data from Refinitiv.

Revenue from selling advertising on the app jumped about 50% to $446.2 million in the third quarter and beat an average analyst estimate of $435.05 million.

Average revenue per user jumped 33% to $2.12 during the quarter from a year earlier.

The company's net loss narrowed to $227.4 million, or 16 cents per share, from $325.1 million, or 25 cents per share, a year earlier.

Excluding items, Snap posted a loss of 4 cents per share in the quarter. Analysts had expected a loss of 5 cents per share. (Reporting by Akanksha Rana in Bengaluru and Sheila Dang in New York; Editing by Shailesh Kuber and Richard Chang)