Author: BRIAN DEAGON
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Snap (SNAP) reported fourth-quarter results late Tuesday that very narrowly fell short of revenue estimates and beat earnings forecasts during a tumultuous period for the social media company. Snap stock plunged.
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The company reported adjusted earnings of 14 cents a share on revenue of $1.3 billion. Analysts looked for Snap to report earnings of 11 cents a share on revenue of $1.31 billion.
Despite the earnings beat, the company said in a letter to investors that it’s seeing a decline in revenue of roughly 7% thus far in its first quarter.
“Our internal forecast assumes revenue will be between -10% to -2% year over year in Q1,” Snap said.
Snap Plummets; Facing Headwinds
Snap stock plummeted 14% to 9.93 during after-hours trading on the stock market today.
In late August, Snap said it would slash 20% of its workforce of more than 6,000 people as part of a companywide restructuring.
The company owns and operates the Snapchat social media app. It has warned it may suffer a period of low revenue growth well into this year.
“We continue to face significant headwinds as we look to accelerate revenue growth, and we are making progress driving improved return on investment for advertisers and innovating to deepen the engagement of our community,” Chief Executive Evan Spiegel said in the earnings release.
Snap Stock: Adjustments May Be Needed
“The company executed a significant restructuring initiative last year,” Monness Crespi Hardt analyst Brian White said in a note to clients. “However, more adjustments may be necessary if the environment further deteriorates.”
Like other social media companies, Snap was hurt by privacy changes made by Apple (AAPL) that led to a discomforting decline in revenue. Further, ads account for almost all of its revenue.
“Outside of Snap’s internal issues, the competitive landscape remains fierce and we believe the darkest days of this economic downturn are ahead of us,” White said.
Jefferies analyst James Heaney maintained a hold rating on Snap stock and price target of 10.
“We would wait to see evidence of an improving revenue growth trajectory before becoming more positive,” he said in his note to clients.
Snap stock has an IBD Composite rating of 20 out of 99.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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