Stock Market News

Snap slumps as ad sales lag larger rivals

2024.02.07 13:24


© Reuters. FILE PHOTO: Snapchat app is seen on a smartphone on this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

By Samrhitha A

(Reuters) -Snap slumped greater than 32% on Wednesday after fourth-quarter income missed Wall Street expectations, with the corporate struggling to compete for promoting {dollars} towards heavyweights such as Meta (NASDAQ:) and Alphabet (NASDAQ:).

The Snapchat proprietor’s outcomes are in distinction to sturdy promoting sales that rivals reported, an indication that advertisers are gravitating in the direction of larger, steady corporations amid an unsure economic system.

Snap, whose shares almost doubled final 12 months, was on observe to lose roughly $9.2 billion in market worth, primarily based on its share worth of $11.83 on Wednesday. Rival Pinterest (NYSE:) additionally fell almost 1.8%.

“Once again, Snap’s results have disappointed investors,” stated Jasmine Enberg, principal analyst at Insider Intelligence, including the corporate’s rebound hasn’t stored tempo with the large tech titans.

Meta’s promoting sales surged 25% in the course of the vacation quarter and Alphabet’s Google ad enterprise grew 11% as ad sales from YouTube elevated 16% in the identical interval.

“Coming so soon after the stellar Meta performance, a nagging worry about the way Snap is being run has turned into a crisis of confidence,” Susannah Streeter, head of cash and markets at Hargreaves Lansdown, stated.

The firm’s fourth-quarter income got here in at $1.36 billion, lacking estimates of $1.38 billion, in line with LSEG knowledge.

Snap stated earlier this week it could lay off 10% of employees, or 528 workers, as a way to “invest incrementally” within the firm’s development over time.

“While the layoffs show a company unafraid to lean out … cost per employee remains well above peer benchmarks, while ad revenue growth remains well below,” Bernstein analyst Mark Shmulik stated.

Snap’s shares commerce at 88.37 instances anticipated earnings, in contrast with a ahead price-to-earnings (PE) ratio of twenty-two.71 for social media rival Meta and 29.47 for Pinterest. A decrease PE a number of signifies a extra engaging funding alternative.

“Investor patience has been tested, and it’s clear fewer are optimistic about Snap’s ability to bounce back from the ad slump,” Streeter stated.

Snap’s shares had been set for his or her worst day since July 2022.

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