Snap’s stock was one of the clear winners of the pandemic. In March 2020, you could still get a share for under $9, but by September 2021, you had to pay over $83 for a share at its peak. However, the hype around the stock has now disappeared. After shockingly weak numbers, the stock tumbled by a third and is now available for less than $11.50 (closing price on February 7, 2024: $11.41).

Snap in Profile Snap is a US technology and social media company. Its products include the instant messaging service SnapChat, which allows users to send photos that automatically delete after a short time. In addition to the app, Snap also produces a wearable camera called Spectacles in the form of sunglasses. Snap has described itself as a camera company. The company is also now working on augmented reality.

Snap was founded in 2010 by Frank Reginald Brown IV, Evan Thomas Spiegel, and Robert C. Murphy and is headquartered in Santa Monica, CA.

Massive Loss of Growth Momentum From 2015 to 2022, Snap experienced rapid growth. Revenue increased from $59 million to $4.6 billion. However, losses also increased significantly to $1.43 billion.

However, the growth momentum has now significantly decreased. In the final quarter of the 2023 fiscal year, revenue only increased by 5% to $1.36 billion compared to the previous year. This missed analysts‘ estimates of $1.38 billion. The company attributes part of the weakness to the conflict in the Middle East, which began with Hamas’s attack on Israel on October 7.

Snap experienced a significant decline in earnings. Adjusted earnings per share were 8 cents, slightly higher than Wall Street’s expectations of 6.4 cents per share, but 42% lower than the previous year.

Number of Active Users Increases At the same time, Snap saw an increase in active users. The number of daily active users exceeded expectations at just under 412 million, an increase of 10% to 414 million. Compared to the previous quarter (Q3 2023), 8 million new daily users were added.

However, users were less profitable: In comparison to the previous year, revenue per user decreased from $3.47 to $3.29, a decrease of 5.2%. There were significant regional differences, with Snap generating $8.96 per user in North America (+2.2%), $2.49 in Europe (+4.6%), and only $1.03 (-6.4%) for international users.

Investors Unimpressed by Forecast Investors were not impressed by Snap’s forecasts: For the first quarter, Snap expects 420 million daily active users. Revenue is expected to be between $1.095 and $1.135 billion, an increase of 11 to 15%. However, profitability is expected to be well below expectations. Adjusted EBITDA is expected to be between $55 and $95 million. Analysts had previously estimated $32.7 million.

Analysts Remain Cautious Despite the Stock Drop The caution is also reflected in the current studies of Wall Street analysts: Of the 40 analysts who cover the stock, only 6 recommend buying the shares. The majority (30 analysts) rate the stock as Hold, while 4 experts recommend selling.

The range of price targets ranges from $8 to $21, with an average fair value of $13.45 per share.