Snap shares tumbled on Friday following a second-quarter earnings report that missed top- and bottom-line estimates as a weak advertising market hurt performance.
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Snap ( SNAP ) late Thursday reported an adjusted loss of 2 cents per share on revenue of $1.11 billion. Analysts had expected a loss of 1 cent a share on revenue of $1.14 billion.
Snapchat’s parent also declined to provide guidance for the third quarter. It also said it would “significantly slow our rate of hiring as well as the rate of growth in operating expenses.”
Shares of SNAP tumbled 351% to 10.70 in morning trading on the stock market today.
Slowing down search on Snap’s ad platform
“While the continued growth of our community increases the long-term opportunities for our business, our second-quarter financial results did not reflect our ambition,” CEO Evan Spiegel said in written remarks on Snap’s earnings release.
Spiegel said the disappointing results were due to a slowdown in demand for its online advertising platform.
“We are evolving our business and strategy to re-accelerate revenue growth, including innovating our products, investing heavily in our direct response advertising business and cultivating new revenue streams to help diversify our top line growth” , he said.
Fast earnings news attracts peers
Snap and other social media companies get about 97% of their revenue from advertising, which has slowed over the past year.
Shares of other social media also fell. Facebook owner Meta Platforms ( META ) fell 5.5%. Pinterest ( PINS ) fell 9.9%, while Etsy ( ETSY ) fell 3.4%.
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Signs of advertising weakness emerged when Snap reported its first-quarter results on April 21. This report, while showing a small gap in the top and bottom lines, came with a caveat.
Challenges in Reaching Snap Stock
Advertisers in a wide variety of industry groups report macro work environment concerns. These concerns include continued supply chain disruptions, rising raw material costs, economic concerns due to rising interest rates, and concerns related to geopolitical risks stemming from the war in Ukraine.
Another big issue is that Apple ( AAPL ) changed ad tracking in its operating system. Users gained more privacy, but advertisers lost valuable user tracking data. The shift cost social media stocks billions in lost revenue.
“SNAP’s commentary on prospective advertiser demand amid geopolitical conflict, supply chain and inflation-driven headwinds will be key,” Cowen analyst John Blackledge said in a note to clients ahead of Snap’s earnings report.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more information on tech stocks, analysis and financial markets.
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