Snap Shares Dive 34% After Q4 Earnings Miss

Key Points

• Snap shares tumbled over 34% post-Q4 earnings, marking its third major drop since 2017.
• Q4 revenue hit $1.36 billion, slightly missing expectations, with adjusted EPS at 8 cents.
• The company faces its sixth quarter of modest growth or declines, with slow momentum forecasted.
• Analysts adjust Snap’s ratings and price targets amid performance concerns.
• CEO Evan Spiegel emphasises advertising strategy shifts and operational streamlining.

Snap Inc. faced a significant downturn in the stock market, with shares tumbling over 34% following the announcement of its fiscal fourth-quarter earnings. This drop is one of Snap’s most severe since its 2017 IPO, exceeded only by a 43% decrease in May 2022 and a 39% decline shortly thereafter. This reaction from investors highlights growing concerns about Snap’s capability to overcome market challenges and maintain growth.

Revenue Falls Short: Q4 Reaches $1.36 Billion, Below Expectations

The earnings report disclosed a slight revenue miss, with Snap generating $1.36 billion, falling short of the anticipated $1.38 billion. Nonetheless, it exceeded expectations in adjusted earnings per share (EPS), reporting 8 cents compared to the expected 6 cents. Despite these mixed outcomes, the broader picture remains worrisome for Snap as it struggles with either single-digit growth or sales declines for the sixth consecutive quarter. The company remains cautiously hopeful for the next quarter’s progress, though expectations are more modest than analysts had predicted.

Market Analysts Revise Snap’s Outlook

Following the earnings release and Snap’s market performance, financial analysts have swiftly updated their ratings and price targets. Morgan Stanley reaffirmed an underweight rating, lowering their price target to $11, while Barclays kept an overweight rating with a $15 price target. JPMorgan continued with an underweight rating, adjusting its price target from $9 to $11 based on revenue projections for 2025. These varied views underscore the uncertainty and mixed expectations for Snap’s future.

Strategic Overhaul: Snap Targets Advertising Shift, Cuts 10% of Staff

In the face of financial challenges, CEO Evan Spiegel highlighted efforts to improve advertiser results and broaden advertising investments beyond leading Big Tech companies. Furthermore, Snap announced a major reduction in its workforce, cutting about 10% of its staff to enhance operational efficiency. These actions indicate Snap’s shift towards operational flexibility and a focused approach to advertising, aiming to stabilize and eventually expand its market presence in difficult circumstances.

Snap’s path forward is marked by obstacles, but its strategic changes and initiatives to reignite growth offer a cautiously optimistic view. As the company navigates market volatility and industry transformations, its adaptability and strategic direction will be crucial for turning current challenges into opportunities for revival.