Snap stock on Friday plunged to levels not seen in more than three years as the social media company reported third-quarter results that raised alarm bells among analysts.
"Our revenue growth continued to decelerate in the third quarter and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds and increased competition," Snap said in its letter to shareholders.
Late Thursday, the Snapchat parent reported an adjusted loss of 8 cents a share on revenue of $1.13 billion. Analysts expected Snap to report a loss of 24 cents on revenue of $1.14 billion.
Snap stock collapsed 28.1%, closing at 7.76 on the stock market today.
Third-quarter revenue grew 6% from the year-ago period. Jefferies analyst Brent Thill said revenue growth below 8% could leave investors thinking fundamentals are not improving. Thill made the comment in a note to clients issued before the report.
Snap said it ended the quarter with 363 million daily active users. Thill said daily active users below 360 million could raise questions about engagement.
Snap Stock: Three Strategic Priorities
"This quarter we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, reaccelerating and diversifying our revenue growth, and investing in augmented reality," Snap Chief Executive Evan Spiegel said in a written statement.
In August, Snap said it would lay off 20% of the company's roughly 6,000 employees. Further, that was part of a major restructuring plan.
Like other social media companies, Snap is navigating difficult times. The digital ad business is deteriorating amid an uncertain economic outlook. This includes being hindered by Apple's recent privacy changes. In addition, Snapchat is seeing increased competition from TikTok.
"Snap has struggled over the past few quarters and the market is giving a vote of no confidence," Monness Crespi Hardt analyst Brian White said in a note to clients.
Competitive Landscape Remains Fierce
"The competitive landscape remains fierce, and we believe the darkest days of this economic downturn are ahead of us," White added.
RBC analyst Brad Erickson cut his price target on Snap stock to 8 from 11.
"Snap's ongoing challenges in projecting revenue, the concentrated advertiser base and outsized exposure to lower ad budgets leave us sidelined," Erickson wrote in his note to clients. "We would need to see evidence of more durable ad spending and further content differentiation to get more constructive."
In addition to the decline in Snap stock, Facebook-parent Meta Platforms stock was down more than 4% early Friday, near 126.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
