Shares in Snap plunged Wednesday after the social media platform reported fourth-quarter adjusted profit that topped estimates while revenue missed Wall Street targets. The company plans higher investments for Snap stock amid stiff competition for consumer social media usage.
Snap reported Q4 financial results after the market close on Tuesday. On the stock market today, Snap stock plunged 34.6% to close at 11.41. The company owns and operates the Snapchat social media app.
"Snap's ad turnaround remains slower than expected and engagement weak," said Morgan Stanley analyst Brian Nowak in a report.
Snap faces fierce competition from Meta Platforms, TikTok and Alphabet's fast-growing YouTube short-form video services.
Snap Daily Active User Growth Slows
In the December quarter, Snap added 8 million daily active users vs. estimates of 6 million. But Snap added 12 million daily active users in the December 2022 quarter.
In North America, daily active users fell by one million in Q4 from the September quarter. The company ended 2023 with 414 million active daily users, up 10% from a year earlier.
Snap told analysts it expects to add 6 million daily active users in the current quarter, ending March 31.
For the first quarter of 2024, Snap forecast an EBITDA (earnings before interest, taxes, depreciation and amortization) loss in a range of $55 million to $95 million, well above estimates for an EBITDA loss of $25 million. Snap plans bigger investments to improve consumer engagement.
"Management cited ongoing investments with the expectation of driving better engagement and profitability over time," said TD Cowen analyst John Blackledge in a report. "Management also expects higher, timing-related marketing expense in Q1."
Snap reported Q4 adjusted earnings per share of 8 cents, vs. 14 cents in the year-earlier period. Analysts had predicted adjusted profit of 6 cents per share.
In the fourth quarter, Snap revenue rose 5% to $1.36 billion, missing estimates of $1.38 billion.
Snap Stock Technical Ratings
The social media firm's September-quarter revenue also rose 5%. Sales had declined in the first two quarters of 2023.
Adjusted earnings before interest, taxes, depreciation and amortization, known as EBITDA, came in at $159.1 million. Analysts had estimated Q4 EBITDA of $110.3 million.
In the current March quarter, Snap forecast revenue in a range of $1.095 billion to $1.135 billion vs. estimates of $1.12 billion. At the midpoint of guidance, Snap forecast $1.115 billion, below views.
Snap still garners most advertising from digital advertising. Its fledgling subscription service, Snapchat+, had 7 million subscribers as of Dec. 12, 2023, and 5 million as of Sept. 30.
Snap stock has forged an entry point of 17.90. The stock has an IBD Relative Strength Rating of 97 out of 99, according to IBD Stock Checkup.
On Monday, Snap said it plans to cut 10% of its workforce in 2024 as part of a restructuring plan. Snap had roughly 5,300 employees as of Q3 last year.
In August 2022, Snap slashed 20% of its workforce.
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
