In after-hours trading on July 21, Snap’s (NYSE: SNAP) stock plummeted by 26.8% following its earnings announcement. Despite topping expectations on net user additions, the company fell short of revenue measures and also removed its Q3 guidance, causing market participants to pull the plug on the stock.
In addition, the earnings highlighted revenues of $1.11 billion, a 13% year-on-year (YoY) increase, missing expectations by $20 million; furthermore, the earnings per share (EPS) were -$0.02, beating estimates by $0.01. On a positive note, the management said they’re setting aside $500 million for stock repurchase and splitting the stock if it reaches $40 within ten years.
Furthermore, Evan Spiegel, Snap CEO, noted in the earnings call that their Q2 performance is not indicative of their ambitions, as they will look to invest more and find new revenue sources.
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“While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition. We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our top-line growth.”
SNAP chart and analysis
Meanwhile, the after-hours trading on July 21 has seen the stock dip below all daily Simple Moving Averages (SMAs), with the trading range now widening over the last month to $11.86 to $16.55.
Similarly, a large trading volume increase has been noted in the after-hours, with the previous support of $13.13 broken, possibly creating a new level at $11.50.
Analysts on Wall Street agree that the stock is a ‘moderate buy,’ with average price predictions for the next 12 months at $21.89, 33.88% higher than the current trading price of $16.35.
Persistent macro issues such as supply-chain issues, the war in Ukraine, and high inflation have led to a more challenging business environment for Snap; in turn, the company experienced a marked slowdown and demand destruction.
With Q3 guidance pulled, investors should brace for more volatility in the stock, with most of the aggressive moves possibly over.
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