Nap (SNAP) on Friday, shares plunged to levels not seen in more than three years as the social media company reported third-quarter results that set off alarm bells among analysts.
“Our revenue growth continued to slow in the third quarter and continues to be affected by a number of factors we’ve seen over the past year, including platform policy changes, macroeconomic headwinds and increased competition,” Snap said in its letter to shareholders.
On Thursday night, Snapchat’s parent reported an adjusted loss of 8 cents a share on revenue of $1.13 billion. Analysts had expected Snap to report a loss of 24 cents on revenue of $1.14 billion.
Snap shares crashed 28.1%, closing today at 7.76 in the stock market.
Third quarter revenue grew 6% from the same period a year ago. Jefferies analyst Brent Thill said revenue growth below 8% could leave investors thinking fundamentals aren’t 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 that daily active users below 360 million could raise questions about the compromise.
Snap Stock: Three Strategic Priorities
“This quarter we took steps to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, re-accelerating and diversifying our revenue growth, and investing in augmented reality,” said CEO Snap’s Evan Spiegel in a statement. written statement.
In August, Snap said it would lay off 20% of the company’s roughly 6,000 employees. Also, that was part of a major restructuring plan.
Like other social media companies, Snap is going through tough times. The digital advertising business is deteriorating amid an uncertain economic outlook. This includes being hindered by AppleRecent changes in privacy. Also, Snapchat is experiencing increased competition from TikTok.
“Snap has struggled in recent quarters and the market is casting a vote of no confidence,” Brian White, an analyst at Monness Crespi Hardt, said in a note to clients.
The competitive landscape remains fierce
“The competitive landscape remains fierce and we believe the darkest days of this economic downturn are ahead,” added White.
RBC analyst Brad Erickson cut his price target on Snap shares to 8 from 11.
“Snap’s continued revenue projection challenges, 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 longer lasting ad spend and greater content differentiation to be more constructive.”
In addition to the drop in Snap shares, Facebook-parent Metaplatforms (META) shares fell more than 4% early Friday, near 126.
Follow Brian Deagon on Twitter at @IBD_BDeagon for more information on technology stocks, analysis and financial markets.