Snap stock (NYSE:SNAP) slumped in after-hours trade after its earnings fell short of forecasts. Snap’s stock (NYSE:SNAP) fell by 25%, most likely due to losses increasing to $360 million and growth slowing dramatically compared to prior years.
However, things were not as terrible as they seemed; after correcting for one-time restructuring expenses of $155 million, the losses were significantly smaller. The stock price decrease might be an overreaction, but investors are significantly less inclined to ascribe high values to stocks than they were a few years ago.
Stap Stock: Examining the basics once again
Snaps’ fundamentals remain unchanged for the time being, and although losses persist, DAU climbed by 19%, but ARPU fell 11% to $3.11. The decrease in ARPU should come as no surprise; it has been noticed that marketers have become much more selective when spending dollars on social media, and Snap is no exception. Advertisers have recently re-evaluated the return on investment from different channels and whether it makes sense to continue allocating advertising budgets at the same pace as in prior years.
However, another issue limiting ARPU growth is the growing number of customers from the rest of the globe. The rest of the world’s users climbed by 34%, while North America’s users increased by 4%. The growing share of non-North American users indicates that ARPU will experience headwinds since these customers tend to generate lesser revenue. However, these consumers have a better future in terms of development and will serve to propel growth for a much longer period.
“Our revenue growth continued to decline in Q3 and has been affected by a variety of issues we have noticed over the last year, including platform policy changes, macroeconomic challenges, and greater competition,” said Snap in a statement to investors.
Snap has also declared that it would lay off 20% of its workforce to reorganize its company. The layoffs will mostly involve inactive business segments, although the core of Snap’s operation is unlikely to be impacted. Snap’s personnel decrease should allow it to concentrate on its core business, around which it is preparing a variety of social media movements.
Snap’s management did remark that things should improve in the future since Q4 revenue is disproportionate in terms of producing money, and so, Q3 numbers should be seen from a larger perspective. Snaps’ foundations remain intact, but it has been suffering headwinds from both its user base’s younger demographics and macroeconomic challenges, which are now obviously influencing marketing spending.
What Next for Snap Stock
For the time being, Snaps’ future seems stable. Although macro headwinds are impacting the company, the larger fundamentals remain intact. Snap has many opportunities to expand its user base. Still, investors will be watching to see how much income the new users bring in. Snap stock (NYSE:SNAP) is expected to remain under pressure till then. However, short-term emotion aside, any positive news will likely result in another rise.
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Author Okoro Chinedu 
