Scott Fullman, COO of Revere Securities, and Thomas Hayes, Chairman of Great Hill Capital, analyze Q2 results and identify equity market opportunities at The Claman Countdown.
Snap Inc. shares plunged 38% during Friday’s trading session after the social media giant reported disappointing second-quarter earnings results.
| ticker | security | Last | change | change % |
|---|---|---|---|---|
| SNAP | SNAP INC. | 9.95 | -6.42 | -39.22% |
Snap posted a net loss of $422 million, or an adjusted loss of 2 cents a share, on revenue of $1.11 billion. Economists polled by Refinitiv expected a loss of 1 cent per share on sales of $1.14 billion.
The results were attributed to various factors, including difficult 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 the “rest of the world” region.
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Snapchat’s logo is seen on a phone screen in this illustration photo in Poland, November 29, 2020. (Photo illustration by Jakub Porzycki/NurPhoto via Getty Images/Getty Images)
Snap declined to provide financial guidance, citing “incredibly challenging” forward-looking visibility. The company expects a total of 360 million daily active users in the third quarter and said its quarterly earnings are roughly flat year-to-date.
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Going forward, Snap Chief Financial Officer Derek Anderson said the company will “substantially slow down” its hiring rate, “effectively halt” headcount growth and curb growth in non-personnel operating expenses. The company also said it will continue to invest heavily in its platform, products and direct response advertising business to “pave a path to balanced or better free cash flow.”
Snap Inc. shares plunged 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 subscribe to for the medium term” before even considering consumer spending. The company downgraded Snap stock to perform from outperform and removed its 12-month price target of $22 per share.
Helfstein told FOX Business he expects Snap to focus on improving tools that would draw advertisers to its platform. He believes the company could potentially benefit from working with a “bigger company.”
“I think if they were part of a bigger company, it would give them the opportunity to probably invest more aggressively in the tool that they need for advertisers, while also developing all sorts of new, interesting products,” he explained.
| ticker | security | Last | change | change % |
|---|---|---|---|---|
| META | META PLATFORMS INC. | 169.27 | -13.90 | -7.59% |
| ALPHABET INC. | 107.90 | -6.44 | -5.63% | |
Despite Snap’s problems, Helfstein believes most of the problems are company-specific.
“I expect every company to say they’re concerned about the prospects for advertising and to be cautious about what’s happening with consumer spending,” he added.
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Goldman Sachs, which downgraded Snap to neutral from “buy” and lowered its 12-month price target to $12 per share from $25, expects the stock to “range in the short/medium term.” will” as investors see a “new normal of low revenue growth, optimized hiring frequency and little/no visibility into improved 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 user engagement, a attractive installed base/young audience and efforts in [augmented reality].”
At the time of publication, Snap stock is down more than 78% year-to-date.