Snap Inc finds itself engulfed in a maelstrom of market woes as its shares plummeted by a staggering 35% in Wednesday morning trading. The freefall comes hot on the heels of the company’s disappointing fiscal fourth-quarter (Q4) earnings report, which not only missed revenue estimates but also offered a bleak outlook for Snap, sending shockwaves through Wall Street.
At the time of this publication, Snap Inc stock (SNAP) has witnessed a decline.
Snap Inc
Current Price: $11.32
Change : -6.13
Change (%): (-35.13%)
Volume: 99.3M
Source: Tomorrow Events Market Data
The darling of the social media landscape is grappling with a sluggish rebound from the adversities of the 2022 advertising market, finding itself lagging behind its counterparts, notably Meta. While Meta seems to have weathered the storm with relative ease, Snap is enduring one of its darkest days on the market since its much-heralded debut back in 2017. The severity of the plunge is reminiscent of its previous market tumbles, including a harrowing 43% drop in May 2022 and a subsequent 39% plunge just two months later.
According to Q4 report, Snap reported revenue figures of $1.36 billion for the quarter, slightly below the $1.38 billion mark anticipated by analysts. The company managed to salvage some semblance of positivity with adjusted earnings per share of 8 cents, outstripping the 6 cents forecasted by analysts.
However, this marks Snap’s sixth consecutive quarter of either sluggish single-digit growth or outright sales declines, a disheartening trend that has investors on edge. Despite management’s assurances of a forthcoming uptick in growth for the first quarter, the pace falls short of the bullish expectations set by analysts.
In the wake of this tumult, analysts at Morgan Stanley have maintained their underweight rating for Snap, slashing their price target to a mere $11. They cite the company’s lethargic ad turnaround and feeble engagement metrics as areas of concern, particularly in light of the robust ad improvements witnessed at Meta and Amazon, which could further impede Snap’s ad revenue.
Snap, in a letter addressed to investors, acknowledged the headwinds posed by geopolitical tensions, attributing approximately 2 percentage points of the fourth-quarter’s year-over-year growth decline to the conflict in the Middle East.
While pessimism looms large, not all analysts are singing the dirge of despair. Barclays analysts, undeterred by the grim earnings report, maintain an optimistic outlook, retaining an overweight rating and a $15 price target on Snap shares. They argue that while the fourth quarter may have been a mixed bag, the projected acceleration in the first quarter instills confidence in a potential turnaround, likening Snap’s current predicament to Meta’s trajectory five quarters ago.
Conversely, JPMorgan analysts remain cautious, reiterating their underweight rating on Snap shares while modestly upping their price target to $11. They emphasize the necessity for stronger growth in engagement and the ad platform, especially in light of the erratic recovery depicted in Snap’s latest earnings and outlook.
As Snap navigates through this tempest of uncertainty, the company finds itself at a crossroads, tasked with proving its mettle amidst the relentless scrutiny of investors and analysts alike. The road ahead is fraught with challenges, and only time will tell if Snap can weather the storm and emerge stronger on the other side.
