Snap Share Dive 38% Following Poor Result Earnings Report
Snapchat is a social media app that allows its user to instantly share their memories with their fellow friends over one Snap. Today marks a dark day for this popular app as snap shares dive down to 39% from the stock market following poor earnings reports. The shares dropped on Friday as the company provided disappointing results. Snapchat reported its results based on the economy and is delivering slow progress on its online platform from Apple IOs updates to apps, the TikTok acting as its competition. The snap stock price at this moment is 9.96 USD after a decrease of 39% of its share in the stock market on Friday.
Snap stock is affected due to the demand for advertising reducing slowly. Company’s CEO Evan Spiegel stated that the company’s deterioration was predicted as the demand for advertising falls further down due to multiple reasons which are the downfall of the economy, the rise of inflation, and the increase of competition. As of today, the snap stock price per share is still $9.96, $6.39 dollars were dropped due to the drop in the shares on Friday.
According to the snap stock forecast conducted by 33 analysts for a period of 12 months. The price forecast had a median target of 15.00, with a high estimate of 35.00 and a low estimate of 9.00. The analysis of the median estimate shows a surge of +50.68% increase from the last price of 9.6. The analysis recommended from a consensus of 41 polls of investment is to hold the snap chat stock. The ratings have held steady since July when the shares were downgraded from the buying rate.
Snap stock earnings rate shows a ‘high’ Earning Quality Ranking (EQR) for the 13th consecutive week. The earning quality shows the data of the current earnings which also predict the future earnings as well. EQR shared a detailed report of the Snap second quarter 2022 financial results after which the shares crashed down to 39%.
After the downfall and by failing to provide the results to Wall Street in the second quarter of 2022 financial result many investors are asking this one question ‘Is snap a good stock to buy’. To answer this question let’s look at this photo-sharing app prospect and weigh them against its valuation to decide. The company makes money by advertising to users browsing the platform, so far regarding this, it has done a good job in growing revenue from $59 million to $4.1 billion between 2015 and 2021. Similarly Snap has also boosted 332 million daily active users, which represents an increase of 13 million from the previous quarter. The more users, the more marketers are willing to pay for the advertisement. Although Snapchat has consistently achieved profit on the bottom line by continuously adding new and attractive tools to the users to increase its advertising capabilities, it has a lower operating loss from a peak of $3.5 billion in 2017 to $702 million in 2021.
Moreover, the slow-paced of its growth to generate revenue is also been affected by its recent update to adjust the privacy policy changes implemented by Apple which makes it even more difficult to collect user data. The information was crucial to attract targeted ads but it has now been refrained by Apple’s new privacy policy, another major issue is that Snapchat is the most expensive among its other social media peers including Meta Platforms (META -7.59%) and Pinterest (PINS -13.51%). Snap trades at a price-to-sales ratio of 5.4 while Pinterest sells at 5.2 and Meta for 4.1. The difference in the pricing can be more magnified when you look through the price-to-free-cash-flow metric, where Snap holds five times pricier than Pinterest and almost 10 times higher than Meta. The analysis report shows that even though it is growing rapidly among its peers but arguably not justifiable, the premium to its peers. Therefore after the social media headwinds and the changes in the privacy policy along with the snap expensive evaluation, it is safe to say that snap stocks are not good to buy for now.
