Snap Inc (NYSE:SNAP), the company that runs social media app Snapchat, was hacked earlier this year and as a result, laid bare some of its highly-sought after source code for its iOS app, per a report in the news outlet Motherboard.
In the wake of the hacking, the exposed source code was archived in the files of GitHub, the code repository site. Upon this discovery, Snap demanded that GitHub expunge the data and sent along a copyright act request as well, according to the Motherboard story.
“An iOS update in May exposed a small amount of our source code and we were able to identify the mistake and rectify it immediately,” a Snap representative told Motherboard in an email. “We discovered that some of this code has been posted online and it has been subsequently removed. This did not compromise our application and had no impact on our community.”
Even though Snap shed daily active users in the quarter for the first time, its shares soared by more than 6% in after-hours trade Tuesday to hit US$14 after the social media group zipped past Wall Street’s estimates for second-quarter revenue and profit.
But investors grew more cautious about the stock just a day later and sent Snap's shares down 3.4% in Wednesday's pre-market session to US$12.67.
On a per share basis, Snap posted a loss of US$0.14 on revenue of US$262mln, which trounced Wall Street’s projection of a loss of US$0.17 per share on revenue of US$251mln.
But the company saw its daily active users fall to 188mn in the quarter from 191mln in the previous period. This figure also fell short of the Street’s projection of 192mln.
The decline in its users raises concerns about Snap’s ability to compete in the crowded market for social media groups.
One possible reason for the fall in members is Snap’s redesign conducted earlier this year, which has sparked controversy as some users now face more difficulty navigating the site.
Keeping a Neutral rating on the stock, Michael Pachter, a Wedbush analyst, took a skeptical view of the results, noting that Snap is "burning cash at an alarming rate" and needs to more than double its revenue to reach breakeven levels on its cash flow.
"Snap's user growth has stalled, perhaps temporarily, but until we see signs of a return to user growth, it is difficult to forecast a turnaround in the company's profit picture," Pachter wrote in a note to investors.
The company’s average revenue per user did jump 34% to US$1.40 in the second quarter to US$1.40, compared to US$1.05 in the year-ago quarter.
In another bit of news, Prince Alwaleed of Saudi Arabia has moved to acquire a 2.3% stake in Snapchat worth US$250mln.
-- updated with revised share price and analyst commentary --