Snap’s stock value fell by 30% on Wednesday morning, following the company’s failure to meet revenue predictions and weak future predictions in its fourth-quarter earnings report.
The company is having a hard time bouncing back from a difficult 2022 advertising market, especially when compared to other companies like Meta.
Snap is experiencing one of its worst market days since it started in 2017. Its two largest single-day drops were a 43% fall in May 2022 and a 39% drop two months later.
Snap announced a revenue of $1.36 billion for the quarter, which is slightly less than the $1.38 billion analysts predicted, according to LSEG, previously known as Refinitiv. The company reported an adjusted EPS of 8 cents, which is higher than the 6 cents analysts predicted.
These results show the company’s sixth consecutive quarter of single-digit growth or sales decreases. Snap predicted that its growth would speed up in the first quarter, but not as quickly as analysts predicted.
Morgan Stanley analysts kept their underweight rating on Snap and reduced their price target to $11 in a note to investors on Wednesday. They wrote that the company’s ad turnaround was slower than expected and its engagement was weak. They noted that strong ad improvements and impression growth at Meta and Amazon could pose another challenge for Snap’s ad revenue.
“While we are happy with the progress we are making with our ad platform and the improved results we are delivering for many of our advertising partners, we estimate that the start of the conflict in the Middle East was a challenge to year-over-year growth of approximately 2 percentage points in Q4,” Snap said in a letter to investors.
Barclays analysts remained hopeful after the earnings, keeping an overweight rating and $15 price target on the stock. They wrote that “buying the dip seems worrying but is likely the right thing to do here.”
“Looking back, the fourth quarter was a mixed bag, but the speed up in the first quarter gives us confidence that things are getting back on track,” the analysts wrote. “Snap feels like Meta about five quarters ago, at the start of some pretty nice recovery trends but with few believers in the idea.”
JPMorgan analysts repeated their underweight rating of Snap shares while increasing their price target from $9 to $11 based on 2025 revenue expectations of around $5.9 billion. They wrote that “stronger growth in engagement and the ad platform” is needed considering the “uneven recovery” shown in the company’s fourth-quarter earnings and first-quarter outlook.
“In the meantime, the extreme changes in Snap’s stock value will keep many people away, and the company will need to continue to show that it can drive improved execution,” they wrote.
Evan Spiegel, CEO of Snap Inc., speaks onstage during the Snap Partner Summit 2023 at Barker Hangar on April 19, 2023 in Santa Monica, California. Image Credit: Joe Scarnici | Getty Images Entertainment | Getty Images