Investors were in for a shock as Snap stock plummeted by over 30% on Wednesday, following disappointing quarterly earnings results from the parent company of Snapchat. With quarterly revenue falling short of street estimates and a projected wider loss in the current quarter, Snap faces a challenging road ahead in regaining investor confidence and completing its turnaround story.
The company reported quarterly revenue of $1.36 billion, missing the expected $1.38 billion and marking the sixth time in the last eight reports that Snap has failed to meet revenue estimates. Compounding the disappointment, Snap anticipates an adjusted EBITDA loss in the range of $55 million to $95 million, a significant increase from the $32.7 million loss predicted by Wall Street.
As Snap outlines plans for “investment” that are expected to drive higher revenue growth, investors are left questioning whether these plans will be sufficient to steer the company towards recovery. RBC Capital Markets analyst Brad Erickson expressed concerns about investors’ dwindling patience for growth-oriented investments, indicating a potential fatigue in waiting for Snap’s turnaround.
Over the past year, investors had placed significant bets on Snap’s potential, resulting in a more than 60% increase in shares over the last six months. However, with each subsequent disappointing quarterly report, the stock has taken a tumble, prompting doubts about Snap’s ability to deliver a compelling growth narrative after its shares once reached over $80.
MoffettNathanson senior research analyst Michael Nathanson echoed the sentiment, suggesting that the market may have been overly optimistic about Snap’s prospects. He highlighted the escalating competition in AI-enabled product solutions from larger companies, casting uncertainty on whether Snap can significantly improve its competitive position and financial profile in the face of such challenges.
With its stock value taking a significant hit, Snap faces mounting pressure to demonstrate a viable path to recovery and growth. As the company navigates these challenges, investors and analysts alike will closely monitor Snap’s next moves and subsequent earnings reports to determine if the company can ultimately turn its fortunes around.