Snap Inc. (NYSE: SNAP), the social media company, posted earnings that were much less than forecast by investors. Its stock plunged 30%. That puts it at about $12 a share. They traded at almost $18 late last year.
Bloomberg pointed out the primary reason for investors’ considerable disappointment in Snap. Digital revenue is down across the industry. Alphabet Inc. (NASDAQ: GOOGL), owner of Google and YouTube, and Meta Platform Inc.’s (NASDAQ: META) Facebook have primarily dodged the decline as advertisers due to their huge numbers of users. However, most other large media companies have suffered.
Savvy investors should have anticipated a problem. Snap laid off 10% of its staff the day before earnings. A company with solid numbers and prospects probably would not have done that. (Customers are abandoning these 25 brands.)
Snap’s revenue rose only 5% in the fourth quarter to $1.36 billion. Alphabet and Meta posted double-digit increases for the same quarter. Snap lost $248 million, compared to a loss of $288 million the year before. Wall Street expected better numbers on both the top and bottom lines.
“2023 was a pivotal year for Snap, as we transformed our advertising business and continued to expand our global community, reaching 414 million daily active users,” CEO Evan Spiegel said as earnings were released. His comments about advertising were overstated, given the results.
Finally, a consideration is that Spiegel has been at the company too long. He co-founded it in 2011 and has been chief executive for much of Snap’s tenure. He has never been able to compete with Facebook, the industry’s leader, and that will not change.
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