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Shares of Snap (SNAP) tumbled more than -30% today to a 2-1/2 month low after reporting Q4 revenue of $1.36 billion, below the consensus of $1.38 billion. The company also said full-year revenue growth was flat, “reflecting a challenging operating environment.” Concerns about future earnings are another bearish factor for the stock as Snap projects a loss in adjusted earnings for the current quarter of -$55 million to -$95 million, much weaker than expectations of -$33 million.
Over the past two years, Snap CEO Spiegel has implemented a broad restructuring plan to boost the company’s profitability. He has been cutting jobs and ending projects that don’t boost revenue or user growth, and on Monday, he said it’s reducing its workforce by an additional 10% this year. Snap has overhauled its core business to improve ad targeting and measure its effectiveness while also increasing its direct-response advertising offerings.
Changes made by Apple in 2021 to its privacy settings made it harder for advertisers to track iPhone users. Those changes by Apple hammered the social-media stocks of Meta Platforms (META) and Snap, although Meta Platforms has since bounced back, posting a 25% gain in Q4, while Snap is still trying to recover. In a letter to shareholders Tuesday, Snap said it was “encouraged by the progress made with its ad platform,” but the conflict in the Middle East was a “headwind” and knocked off about two percentage points of growth in Q4.
Snap reported 414 million daily active users in Q4, up 10% from the same period last year, and more than 800 million people use the company’s Snapchat app globally every month. Almost half of these are in established markets in Europe and North America, regions that Snap said it will now prioritize, saying, “We are shifting more of our focus toward user growth and deepening engagement in our most highly monetizable geographies.”
In an attempt to add new revenue streams, Snap introduced Snapchat+, a paid subscription service that has amassed 7 million paying users with an annualized revenue run rate of $249 million. Some analysts are optimistic about Snap, with Stifel saying, “We are encouraged by the resiliency of the platform’s user base to date despite the rise of new entrants, such as TikTok, and believe the company is well suited to return to healthy top-line growth once the global economic environment improves.” However, not all are convinced, as KeyBanc Capital Markets has doubts, saying, “The incremental concern is whether Snap can move fast enough to gain share against larger competitors that are further ahead in both AI and short-form video.”
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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