Snap Stock Moves Lower Post Q4 Earnings, Now Down 90% From Record Highs
February 02 2023 - 5:36AM
Finscreener.org
Snap (NYSE:
SNAP) shares continue to
slide and burn massive investor wealth. Shares of the social media
company are currently trading almost 90% from all-time highs,
valuing it at a market cap of $16 billion. At its peak, Snap was
valued at $121 billion.
Let’s see why Snap stock slumped
more than 10% following its Q4 earnings and what lies ahead for the
tech company.
How did Snap perform in Q4 of
2022?
In the quarter that ended in
December, Snap reported revenue of $1.30 billion and adjusted
earnings of $0.14 per share. Comparatively, analysts expected the
company to report sales of $1.31 billion with adjusted earnings of
$0.11 per share in Q4.
Snap ended the quarter with 375
million daily active users, while its average revenue per user
stood at $3.47. But Wall Street forecast Snap’s daily active users
at 375.3 million and average revenue per user at $3.49 per
share.
Analysts and investors are now
worried about Snap’s decelerating revenue growth, which rose less
than 1% year over year in Q4. It also reported a net loss of $288
million in the quarter, compared to a net income of $23 million in
the year-ago period.
Moreover, the company’s net
losses almost tripled to $1.43 billion in 2022, while free cash
flow narrowed by 75% to $55.3 million in the last 12
months.
Snap stock is wrestling with slowing growth
Similar to most other tech
stocks, Snap benefitted from the COVID-19 pandemic and increased
sales from $1.71 billion in 2019 to $4.1 billion in 2021. It,
however, ended 2022 with sales of “just” $4.6 billion.
Last April, Snap forecast the
company sales to grow between 20% and 25% in 2022 with an adjusted
EBITDA estimate between $0 million and $50 million. However, soon
after, Snap revised its guidance to reflect a challenging
macro-environment. In 2022, its sales were up 12% year over
year.
In addition to macro factors,
Snap’s top line has been impacted by the following:
- Apple’s privacy
changes
- Lower ad spending by
enterprises
- Competition from
TikTok
It’s the third consecutive
disappointing earnings report for Snap. The stock slumped 28% and
39%
following its Q3 and Q2
results for 2022,
respectively. While analysts expected sales to rise 1.3% in Q1 of
2023, Snap expects it to fall year over year.
What next for Snap stock
price?
It will likely be a very
difficult 12 months for Snap and its social media peers. They will
have to navigate the rising cost of debt and lower consumer and
enterprise spending, which will negatively impact sales as well as
profit margins.
But Snap continues to invest
heavily in its AR (augmented reality) platform to improve customer
engagement and expand its user base. The company stated, “In
December, at our Lens Fest event for AR creators and developers, we
shared that our AR ecosystem continues to grow and now reaches over
300,000 AR creators and developers who have built more than 3
million AR Lenses. We added new features and capabilities to Lens
Studio, our AR development software, which are enabling richer and
more immersive AR experiences and helping deepen engagement with
AR.”
Snap stock is currently valued at
more than three times forward sales and thirty times forward
earnings, which might be quite steep given these estimates might
easily move lower. Is there more pain ahead for
investors?
Snap (NYSE:SNAP)
Historical Stock Chart
From Apr 2024 to May 2024
Snap (NYSE:SNAP)
Historical Stock Chart
From May 2023 to May 2024