Snap Inc. shares plunged 38% during Friday's trading session after the social media giant reported disappointing second-quarter earnings results.
Snap posted a net loss of $422 million, or an adjusted loss of 2 cents per share, on revenue of $1.11 billion. Economists surveyed by Refinitiv were expecting a loss of 1 cent per share on revenue of $1.14 billion.
The results were attributed to various factors, including challenging economic conditions, slowing demand for its online advertising platform, Apple's iOS privacy changes and competition from rivals like TikTok.
Snap's daily active users grew 18% year over year to 347 million, including 99 million in North America, 86 million in Europe and 168 million in its "Rest of World" region.
Snap declined to provide financial guidance, citing "incredibly challenging" forward-looking visibility. It expects a total of 360 million daily active users in the third quarter and said its quarterly revenue thus far is approximately flat on a year-over-year basis.
Going forward, Snap Chief Financial Officer Derek Anderson said the company would "substantially slow" its rate of hiring, "effectively pause" its headcount growth and cut back on its non-personnel-related operating expense growth. The company also said it would continue to invest heavily in its platform, products and direct-response advertising business to "build a path to free cash flow break-even or better."
Oppenheimer analyst Jason Helfstein told clients in a note on Thursday that Snap is "now facing too many headwinds for investors to underwrite stock in the medium-term" before even factoring in consumer spending. The firm has downgraded Snap stock from "outperform" to "perform" and removed its 12-month price target of $22 per share.
Helfstein told FOX Business he expects Snap to be laser-focused on improving tools that will attract advertisers to its platform. He believes the company could potentially benefit from joining forces with a "bigger business."
"I think if they were part of a bigger business, it would give them the ability to probably more aggressively invest in the tool that they need to for advertisers, while at the same time building all kinds of new, interesting products," he explained.
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Despite Snap's struggles, Helfstein believes the majority of its problems are specific to the company.
"I do expect every company to say that they're concerned about the outlook for advertising, and they're cautiously watching what happens with consumer spending," he added.
Goldman Sachs, which has downgraded Snap from "buy" to "neutral" and cut its 12-month price target from $25 to $12 per share, expects the stock to be "range bound for the short/medium term" as investors digest a "new normal of depressed revenue growth, optimized hiring cadence and low/no visibility as to improved operating performance."
CFRA Research, which is maintaining its hold rating on Snap stock, believes the company "remains better positioned than most" to monetize its platform long term, citing its "healthy user engagement levels, an attractive installed base/young audience, and efforts in [augmented reality]."
As of the time of publication, Snap stock has fallen more than 78% year to date.