Snap investors are in a world of hurt this morning after a few whirlwind days that saw the company lay off 10% of its workforce and report worse-than-expected Q4 financial results. As of the time of this writing, shares in Snapchat’s parent company are down over 32% to $11.74 in premarket trading. Just yesterday, SNAP stock was trading at $17.45 per share.
The catalyst for Snap’s massive stock pummeling was the company’s disappointing Q4 results, which were reported after the bell yesterday. While Snap’s revenues were up 5% year-over-year to $1.36 billion, they were below the $1.38 billion that Wall Street was expecting, noted CNBC. Also below expectations was Snap’s quarterly average revenue per user, which was $3.29. Analysts were expecting $3.33.
But what rattled investors the most was that Snap’s ad revenue increase of just 5% fell way behind the increase enjoyed by its biggest advertising rivals, Google and Meta. As Reuters notes, Meta says its advertising sales during the holiday quarter increased 25%. During the same period, YouTube’s ad revenue surged 16% and Google’s went up by 11%.
All this makes Snap’s 5% increase in ad revenue seem paltry—and it doesn’t give investors a lot of confidence that the company can stand toe-to-toe with its larger, more popular competitors in the social media space. This is what’s primarily created the cliff that Snap’s stock has fallen off of, driving the company’s value down by $9 billion.
The sharp drop in SNAP shares is all the more concerning when you consider that Snap on Monday announced it would lay off 10% of its workforce, or about 528 employees. While layoffs are devastating for employees, investors tend to see them as a positive—at least in the short term—because they can be quickest way for a company to cut costs and thus improve its bottom line. But Snap’s layoff news hasn’t seemed to cushion the fall in its stock, which may be an indication of just how concerned investors are about the company’s future.
Snap’s stock is still trading above its one-year low of around $8.23 in May 2023, but the company’s share price is a long way from its all-time high of above $83 per share in September 2021.
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