Snap shares tumbled by 30% in Wednesday morning trading, following the release of the company’s fiscal fourth-quarter earnings report. The stock decline came after Snap missed revenue estimates and provided weak guidance, signaling challenges in its advertising business compared to rivals like Meta.
The social media company is facing a slower rebound in the advertising market after a challenging 2022, lagging behind competitors such as Meta. This performance marks one of Snap’s worst days on the market since its debut in 2017, with its two largest one-day declines occurring in May and July of 2022, dropping by 43% and 39% respectively.
For the fourth quarter, Snap reported revenue of $1.36 billion, slightly below the $1.38 billion expected by analysts. However, the company’s adjusted earnings per share (EPS) of 8 cents exceeded analysts’ expectations of 6 cents. Despite these numbers, Snap has reported six consecutive quarters of either single-digit growth or sales declines.
While Snap anticipates its growth to accelerate in the first quarter, it falls short of analysts’ expectations. Morgan Stanley analysts maintained an underweight rating for Snap and lowered their price target to $11, citing the company’s slower-than-expected ad turnaround and weak engagement. They also highlighted the strong advertising improvements and impression growth at Meta and Amazon, which could pose further challenges for Snap’s ad revenue.
In a note to investors, Barclays analysts remained optimistic, maintaining an overweight rating and a $15 price target on Snap. They suggested that “buying the dip seems worrying but is likely the right thing to do here,” indicating confidence in Snap’s potential recovery.
JPMorgan analysts reiterated their underweight rating for Snap shares but raised their price target from $9 to $11 based on 2025 revenue expectations of around $5.9 billion. They emphasized the need for stronger growth in engagement and the ad platform, considering the “choppy recovery” reflected in Snap’s fourth-quarter earnings and first-quarter outlook.
Despite these challenges, Snap remains optimistic about its progress with the ad platform and the improved results for its advertising partners. The company acknowledged that the conflict in the Middle East had a negative impact on its year-over-year growth in the fourth quarter.
As Snap navigates these challenges, its extreme stock volatility may deter some investors. The company will need to demonstrate improved execution and sustained growth to regain investor confidence.
(Source: NYT | CNBC | Investing.com)
