On Wednesday, February 7, Snap’s share price showed a 30% drop in morning trading.
The mentioned company owns Snapchat, Spectacles, Bitmoji, Looksery, and Zenly. The fall in the share price of this business structure occurred after Snap missed revenue estimates and published weak recommendations in its earnings report for the fourth quarter of 2023.
The company is currently in a kind of recovery struggle. In this case, it means efforts to normalize after 2022, which turned out to be extremely difficult for the advertising market and during which realities were formed that became sensitive factors influencing many brands in a negative sense. Snap’s problem is that its recovery rate has been slower compared to the intensity demonstrated by competitors, including Meta.
For the company, Wednesday was one of the worst days of all time since its stock market presence began in 2017. The previous major drops in Snap’s share price were recorded in 2022. In May of the mentioned year, the company’s securities fell by 43%. Two months later, the corresponding indicator showed a drop of 39%.
Snap reported that its revenue for the fourth quarter of last year was fixed at $1.36 billion. This result did not meet analysts’ expectations, predicting that the corresponding figure would be $1.38 billion.
The company also reported adjusted earnings per share of 8 cents. Analysts had expected this figure to be 6 cents.
Snap predicts that its business growth will accelerate in the first quarter of the current year, but this process will not be implemented at such a rapid pace as experts expect. For six consecutive quarters, the company’s financial indicators have been unambiguous. This means that Snap either demonstrates growth, which is obvious and does not contain any signs of a kind of conventionality or records a decline that goes beyond relativity and belongs to the category of explicit objectivity.
Morgan Stanley analysts maintained the company’s underweight rating and lowered the target price to $11 in a note to investors released on Wednesday. They noted that Snap’s advertising turnaround turned out to be slower than initially expected. Analysts also drew attention to the weak engagement. In their opinion, significant improvements in the advertising business of Meta and Amazon may become an obstacle to the company’s income from concerning activities.
Snap, in a letter to investors, said it was encouraged by the progress that the firm was striving for with an advertising platform and the more positive results that are being provided to partners in the marketing direction, despite the armed conflict in the Middle East has became an obstacle to growth in the fourth quarter of 2023 by about 2 percentage points year-on-year.
Barclays analysts remained optimistic after the publication of data on the financial performance of Snapchat’s owner. They retained the overweight rating of the company and the target share price of $15. Analysts noted that buying securities at a time when their value is falling seems like an alarming decision, but in this case, it is probably the right action. According to them, the last three months of 2023 were an ambiguous period for Snap in terms of results, but the acceleration of the positive dynamic in the current year strengthens confidence in the normalization of the company’s business. Analysts also noted that the owner of Snapchat, in terms of its condition, currently resembles Meta five quarters ago. In their opinion, the company is on the verge of pleasant recovery trends, which few people believe in so far.
JPMorgan analysts confirmed the downgrade of Snap shares, raising the target price from $9 to $11 based on revenue expectations for next year of about $5.9 billion. They also noted that the company needs stronger growth of the advertising platform and increased engagement. The unsustainable recovery reflected in the fourth quarter report and the forecast for the current confirms the importance of these factors. Analysts said that the extreme volatility of Snap shares would be a deterrent for many investors. Against this background, the company needs to continue to demonstrate the ability to drive improved execution.
As we have reported earlier, Snapchat Reportedly Reaps Benefits From Creator Revenue-Sharing Program.
