Snap shares fell more than 30 percent in after-hours trading Tuesday after its guidance fell short of analyst expectations, even as the company reported a 5 percent rise in revenue, its second quarter consecutive growth.
Snapchat's parent company released first-quarter guidance estimating larger-than-expected losses compared to Wall Street expectations, leading some analysts to suspect the company was spending more aggressively than anticipated. Last quarter, Snap declined to provide guidance due to uncertainty surrounding the war between Israel and Hamas.
Adding to concerns, Meta, which owns Facebook and Instagram, reported last week that its profits more than tripled.
“This is particularly problematic for the company after Meta posted such strong numbers in the same quarter, as it suggests that Snap's concerns are not macroeconomic in nature but primarily internal,” said Thomas Monteiro, senior analyst at financial website Investing. .com.
Snap's revenue for the three months ended Dec. 31 was $1.36 billion, up from $1.3 billion a year ago, but below Wall Street projections of $1.38 billion for Snap. Net losses for the fourth quarter narrowed to $248 million, from $288 million a year earlier.
Evan Spiegel, the company's CEO, said in a letter to investors on Tuesday that “2023 was a pivotal year for Snap as we relentlessly focused on adding value to our community while evolving our business for long-term growth.” ”.
On Monday, Snap laid off more than 500 workers, or about 10 percent of its global workforce, part of a larger wave of targeted cuts by technology companies this year.
“While this decision was painful and we will miss our friends and colleagues, we believe these changes are necessary to achieve our long-term goals” and manage expenses, Spiegel said in the letter.
Over the past year, Snap pivoted its business toward direct response ads, which allow customers to click to buy products. Spiegel said the change in advertising platform caused a drop in sales during the first half of the year. But, he said, the move would better position Snap's advertising business for long-term growth.
Analysts, however, have said the app may struggle to find traction with that model, as users use the app primarily to message each other and don't always see ads.
Scott Kessler, an analyst at Third Bridge, said slight revenue growth during a quarter that included the holiday shopping season showed that Snap's changes to the advertising platform “are taking longer and perhaps costing more money than we thought.” people were waiting.”
The company on Tuesday also highlighted successes with new services such as Snapchat Plus, a subscription service available from July 2022 that costs $3.99 per month and now has more than seven million paid users. And it said that Snap Star, a program for creators that began in early 2022, has attracted many content creators to the platform with the promise of earning profits from ads published alongside their public stories.
Snap's user base continued to grow in the fourth quarter. There were 414 million daily active users during the quarter, a 10 percent increase from a year ago. Monthly active users, which are typically reported once a year, increased 8 percent to surpass 800 million.
