Snap’s stock fell 31 per cent on Wednesday as its revenue for the fourth quarter fell short of Wall Street’s projections. The company is finding it difficult to compete with industry giants like Meta and Alphabet for advertising dollars, Reuters reported.
The owner of Snapchat reported strong advertising sales, which contrasts with his own results. This suggests that, in an unpredictable economy, advertisers are choosing to work with larger, more stable companies.
Based on its share price of $12.04 on Wednesday, Snap, whose shares nearly doubled last year, was expected to lose about $9 billion in market value if premarket losses continue. Similarly, Pinterest, a rival, dropped by more than 4 per cent as well.
Meanwhile, Meta advertising sales rose by 25 per cent during the holiday quarter.
Alphabet’s Google ad business also surged by 11 per cent, while YouTube ad sales increased by 16 per cent in the same period.
Jasmine Enberg, principal analyst at Insider Intelligence, stated, “Once again, Snap’s results have disappointed investors,” adding that the company’s comeback hasn’t kept up with the major tech giants.
LSEG data shows that the company’s fourth-quarter revenue of $1.36 billion fell short of analysts’ projections of $1.38 billion.
Snap’s stock is trading at 88.37 times predicted earnings, while rival social media company Meta’s and Pinterest’s forward PEs are 22.71 and 29.47, respectively.
“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 money and markets at Hargreaves Lansdown, said.
Earlier this week, Snap announced that it would let go of 528 workers, or 10 per cent of the workforce, to “invest incrementally” in the company’s expansion over time.
“Layoffs show that Snap is still in cost-cutting mode, but it also needs to show more substantial growth in its core ad business to please investors,” Enberg added.
