Shares of US social media company Snap tumbled as much as 30% briefly in after-hours trading Thursday, after the Snapchat owner reported weaker-than-expected earnings and negative trends for the fourth quarter.
The stock remained down more than 20% in early trading on Friday, below the $60 level.
Snap’s quarterly performance was impacted by changes to Apple’s iOS platform, which hampered its ability to target and measure digital ads, as well as ongoing global supply chain and employment challenges.
The company reported revenue of $1.07 billion, up 57% year-on-year, but fell short of expectations of more than $1.1 billion.
On the positive side, earnings settled at $0.17 per share, beating analyst estimates of $0.08 per share. In the same period last year, Snap reported earnings of $0.01 per share. Moreover, the number of Snapchat’s daily active users grew by 23% year-on-year to 306 million users.
“We are now working on the scale needed to overcome significant headwinds, including changes in iOS that affect the way ads are targeted, measured, and also improved,” said Evan Spiegel, Snap CEO. Like global supply chain issues and labor shortages affecting our partners.”
“We will continue to focus on delivering strong results for our advertising partners and innovation to expand our platform capabilities and better serve our community,” he added.
Based on the current economic environment and business momentum, Snap expects fourth-quarter revenue to fall to between $1.165 billion-$1.205 billion, lower than the forecast of $1.36 billion. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter are expected to range between $135-175 million.
Recently, Wells Fargo analyst Brian Fitzgerald maintained a buy rating on the stock with a price target of $95, indicating a potential upside of 26.5% to current levels.
In his third-quarter results preview report, Fitzgerald was bullish on the results, citing third-party data that concluded active user growth was accelerating, especially in the US.
“Although the monetization background appears to be somewhat mixed, strong, but not exciting, social media spending data points, iOS crosswinds, and specific advertiser class dropouts on supply chain constraints, we believe that Snap They are in a good position and should report strong revenue results.”
Snap shares jumped 92.7% over the past year.
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