Why Snap Stock Was Plunging Today
Shares of Snap (NYSE: SNAP), the parent of Snapchat, were tumbling after the social media company issued another disappointing earnings report. In particular, the company's guidance was weaker than expected, and it grew more slowly than its competitors.
Broader concerns about the economy after a weak unemployment report came out this morning also seemed to be weighing on the stock.
As of 11:13 a.m. ET on Friday, Snap shares were down 24.6%.
Snap's struggles continue
Snap has struggled to grow revenue and deliver profits since the end of the height of the pandemic, and that pattern continued last night.
The social media company reported revenue growth of 16% to $1.24 billion, but that was slower than its first-quarter growth and slightly below estimates at $1.25 billion.
Total daily active users rose 9% to 432 million, though growth in the core North American region was flat at 100 million.
It showed improvements on the bottom line with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $55 million, up from a loss of $38 million in the quarter a year ago. It also eked out an adjusted per-share profit of $0.02, matching estimates.
CEO Evan Speigel said, "We continued to scale our advertising platform with active advertisers more than doubling year over year."
What's next for Snap
Looking ahead to the third quarter, the company forecast that revenue growth would slow again, climbing 12% to 16% to a range of $1.335 billion to $1.375 billion, compared to estimates at $1.6 billion.
It also forecast adjusted EBITDA of $70 million. While that guidance didn't indicate any immediate challenges, it did show that Snapchat is being outgrown by rivals like Meta Platforms, which just posted 22% revenue growth.
Under those circumstances, it seems reasonable to expect Snap to deliver faster growth. The stock is likely to struggle until it overcomes that hurdle.
Should you invest $1,000 in Snap right now?
Before you buy stock in Snap, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Snap wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $669,193!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 29, 2024
Jeremy Bowman has positions in Snap. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Snap Stock Was Plunging Today was originally published by The Motley Fool