Snap Stock Plunges As Quarterly Results Raise Concerns

snap (SNAP) shares tumbled to levels not seen in more than three years on Friday, as the social media company released third-quarter results that set analysts’ alarm bells ringing.


“Our revenue growth continued to decelerate in the third quarter and continues to be impacted by a number of factors that we have identified over the past year, including platform policy changes, macroeconomic headwinds and increased competition,” Snap said in its letter to shareholders.

Late Thursday, the parent company of the Snapchat multimedia instant messaging app reported an adjusted loss of 8 cents a share on revenue of $1.13 billion. Analysts had expected Snap to report a loss of 24 cents on revenue of $1.14 billion.

Snap shares fell 32% to 7.33 during morning trade in the stock market before recovering slightly.

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Revenue for the third quarter rose 6% from the year-ago period. In a note to clients ahead of the earnings report, Jefferies analyst Brent Thill said sales growth below 8% could lead investors to interpret that fundamentals are not improving.

Snap said it ended the quarter with 363 million daily active users. Thill said fewer than 360 million daily active users could raise questions about engagement.

Snap Stock: Three Strategic Priorities

“During this quarter, we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, re-accelerating and diversifying our revenue growth, and investing in augmented reality,” said Evan Spiegel, Snap’s chief executive written statement.

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In August, Snap announced it would lay off 20% of the company’s approximately 6,000 employees. It was also part of a major restructuring plan.

Like other social media companies, Snap is navigating tough times. The digital advertising business is deteriorating amid an uncertain economic outlook. This includes disability Applethe recent privacy changes of . In addition, Snapchat is seeing increasing competition from TikTok.

“Snap has struggled for the last few quarters and the market is issuing a no-confidence vote,” said Brian White, analyst at Monness Crespi Hardt, in a note to clients.

The competitive landscape remains tough

“The competitive landscape remains tough and we believe the darkest days of this economic downturn are ahead,” added White.

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RBC analyst Brad Erickson cut his price target on Snap shares to 8 from 11.

“Snap’s continued challenges in forecasting revenue, concentrated advertiser base and overexposure to lower advertising budgets sideline us,” Erickson wrote in its note to clients. “We would need to see evidence of more sustained ad spend and further content differentiation to be more constructive.”

In addition to the decline in Snap stock, Facebook mother meta platforms (META) stock was down more than 4% early Friday, near 126.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.


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