Revere Securities COO Scott Fullman and Great Hill Capital President Thomas Hayes analyze second-quarter earnings and identify opportunities in the stock market on “The Claman Countdown.”
Shares of Snap Inc. fell 38% during Friday’s trading session after the social media giant reported disappointing second-quarter earnings results.
Security Ticker Last Change Change % SNAP SNAP INC. 9.95 -6.42 -39.22%
Snap reported a net loss of $422 million, or an adjusted loss of 2 cents per share, on revenue of $1.11 billion. Economists polled by Refinitiv had expected a loss of 1 cent per share on revenue of $1.14 billion.
The results were attributed to several factors, including tough economic conditions, slowing demand for its online advertising platform, Apple’s iOS privacy changes and competition from rivals like TikTok.
Snap’s daily active users grew 18% year over year to 347 million, including 99 million in North America, 86 million in Europe and 168 million in its “Rest of the World” region.
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The Snapchat logo is shown on a phone screen in this illustration photo in Poland on Nov. 29, 2020. (Photo illustration by Jakub Porzycki/NurPhoto via Getty Images/Getty Images)
Snap declined to provide financial guidance, citing an “incredibly challenging” outlook. It expects a total of 360 million daily active users in the third quarter and said its quarterly revenue so far is roughly flat year over year.
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Looking ahead, Snap CFO Derek Anderson said the company would “substantially slow” its hiring rate, “effectively halt” its headcount growth and reduce growth in unrelated operating expenses with the staff The company also said it would continue to invest heavily in its direct response advertising platform, products and businesses to “build a path to break even or better.”
Shares of Snap Inc. fell 38% during Friday’s trading session after the social media giant reported disappointing second-quarter earnings results. (iStock/iStock)
Oppenheimer analyst Jason Helfstein told clients in a note Thursday that Snap “now faces too many headwinds for investors to underwrite the stock in the medium term” before factoring in consumer spending. The firm downgraded Snap’s stock from “outperform” to “outperform” and removed its 12-month price target of $22 per share.
Helfstein told FOX Business that he expects Snap to be laser-focused on improving the tools that attract advertisers to its platform. He believes the company could benefit from joining forces with a “bigger business”.
“I think if they were part of a bigger business, it would give them the ability to invest probably more aggressively in the tool that they need for advertisers, while also building all kinds of new and interesting products,” he explained. .
Ticker Security Last Change Change % META META PLATFORMS INC. 169.27 -13.90 -7.59%GOOGL ALPHABET INC. 107.90 -6.44 -5.63%
Despite Snap’s struggles, Helfstein believes most of its problems are specific to the company.
“I expect all companies to say they are concerned about the advertising outlook and are watching cautiously what happens to consumer spending,” he added.
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Goldman Sachs, which downgraded Snap to “neutral” from “buy” and cut its 12-month price target from $25 to $12 per share, expects the stock to be “with range in the short/medium term” while investors will digest a “new normal of depressed revenue growth, optimized hiring cadence and little or no visibility into improving operational performance.”
CFRA Research, which maintains its hold rating on Snap stock, believes the company “remains better positioned than most” to monetize its platform over the long term, citing its “healthy levels of user engagement, a attractive installed base/young audience and their efforts in [augmented reality].”
At press time, Snap shares are down more than 78% year to date.