Snap Stock Plummets After Q1 Earnings Report
Shares of Snapchat’s parent company, Snap, took a hit on Friday after the company released its first-quarter financial results, which missed revenue expectations. The company reported a revenue of $989 million, lower than the expected $1.063 billion (Barron’s). As a result, Snap stock fell by 17.05% on Friday and continued to fall on Monday, ultimately hitting a 24% drop in after-hours trading (TechCrunch).
The disappointing revenue report can be attributed to the changes Snap made to its ad platform to increase click-through conversions, which disrupted demand for ad sales in Q1 (MarketWatch). Despite the slump, Wall Street is still positive on Snap, with analysts giving it a Buy rating and an average price target of $11.142 (InvestorsObserver).
This isn’t the first time Snap has suffered a post-earnings collapse; the stock plunged by 22% in Q3 2020 after it missed revenue expectations (Schaeffer’s Investment Research). In addition, Snap faced tough competition from social media giant Facebook, which recently launched its own version of the popular Snapchat feature, Stories (Barron’s).
Snap’s struggles come at a time when social media companies are facing increased scrutiny over their handling of user data and privacy concerns. This, coupled with the ongoing COVID-19 pandemic, has led to a shift in consumer behavior and advertising spending, affecting the performance of companies like Snap and Pinterest (Yahoo Finance).
Overall, it remains to be seen whether Snap can overcome its Q1 slump and continue to compete in the highly competitive social media market. As it stands, the company has a lot of ground to cover to make up for its missed revenue projections.
