This isn't the first time SNAP stock has been rocked by disappointing company results. On November 20, the company reported its slowest quarterly revenue growth ever.
This negatively impacted the company's overall economics. Another consequence is lower ad demand, creating a vicious cycle.
Shares has seen a 27% drop and even dragged down rival platforms such as Meta, Alphabet and Interest.* The share price is now at the same level as it was in February 2019. On the one hand, the fall is due to unfulfilled expectations in the company's profitability, which was expected to reach 1.14 billion. However, the reality was 10 million lower. On the other hand, the drop was due to the company shocking investors for the second time in less than a quarter. The first blow came in August, when the company announced that it intended to cut jobs by a fifth and cut projects that do not lead to direct user growth. These situations sparked a cascade of sell-offs that continues to this day.
Another factual snag is Apple's rule amendment that requires all apps to have directive user consent to track accounts for marketing purposes. This leads to ad campaign managers having to find more efficient ways to reach users, and it raises the question of whether SNAP, even given the company's current financial situation, will be a wise choice. In addition, the company is announcing a $500 million share buyback, which is considered a logical step, but investors are wondering if this solution will be the way out of the vicious circle for the company.
Snap Inc.'s 5-year performance. Source: tradingview.com
* Past performance is no guarantee of future results.
