Snap Inc.’s share price tumbled in April even after the tech company reported encouraging first-quarter earnings that included increased revenue.
Shares in the Santa Monica-based technology company that owns social media app Snapchat closed at $9.09 on April 29. The following day, the price declined more than 12% to close at $7.96 on the highest trading volume of the past 52 weeks, with 143 million shares exchanged that day.
Snap shares closed at $7.83 on May 1, a 30% decrease in value from the start of the year when it closed at $11.24. That stock price represented an almost 51% drop over the close of $15.86 from a year ago.
Snap stock, however, continues to lag behind other social media companies.
Menlo Park-based Meta Platforms Inc., which owns Facebook, Instagram and WhatsApp, had a closing price on May 1 of $572.21. Pinterest Inc. in San Francisco closed at $25.49.
Earnings report
Snap reported after the market closed on April 29 a net loss of $140 million (down 8 cents a share) for the quarter ending on March 31, an improvement over the net loss of $305 million (down 19 cents) in the same period of the previous year. Revenue increased by 14% year over year from the first quarter of the prior year to $1.36 billion.
While Snap’s earnings of 4 cents per share missed Wall Street estimates, revenue beat the $1.35 billion expected by analysts, according to a survey by Zacks Investment Research.
Analysts attributed the falling stock price on Snap’s decision not to provide guidance for the second quarter. In a letter to investors released on April 29, the company said the decision was based on macro-economic uncertainties and how “conditions will evolve in the months ahead, and how this may impact advertising demand more broadly.”
In a research note, AB Bernstein senior analyst Mark Shmulik wrote that revenue guidance and forward-looking ad market commentary more broadly was the only thing that mattered going into earnings.
“Snapchat didn’t offer revenue guidance besides acknowledging revenues were still growing and headwinds had emerged,” Shmulik said in the note. “Without the revenue guidance, it makes the stock a difficult one to own as estimates may well be all over the place.”
CFRA analyst Angelo Zino said that the lack of guidance is likely “not sitting well” with investors.
“We believe digital ad spend will face headwinds in coming quarters due to tariff uncertainty, with smaller platforms like Snap potentially more vulnerable than larger competitors such as Meta Platforms and Google,” Zino wrote in a research report.
And out of nine analyst firms, including B. Riley Financial Inc. in Sawtelle, eight have lowered its price target on Snap shares as of April 30. B. Riley lowered its price to $10 a share from $12, while BMO Capital Markets Corp. lowered its target price to $13 from $16 and Susquehanna International Group LLP lowered its price to $8 from $13.
Evan Spiegel, chief executive of Snap, said during a conference call with analysts to discuss the first-quarter earnings that the company marked an important milestone in the quarter as it reached 900 million monthly active users on its way to the goal of reaching 1 billion active users per month.
“Our focus on visual communication between friends and family is a strategic advantage that has enabled us to build engaging and retentive services,” Spiegel said.
“In Q1, our community grew to 460 million daily active users, an increase of 38 million year over year and content viewers and total time spent watching content grew year over year,” he added.