Following the completion of yet another difficult quarter, Snap stock (NYSE:SNAP) price has continued its downward trend.

In pre-market trading on Friday, shares of the social media platform dropped by 25 percent after reporting that revenues for the third quarter constituted the fifth consecutive quarterly decline. Profits were also disappointing, as Snap (NYSE:SNAP) continued to point the finger at a slowdown in advertising and changes made by Apple to its privacy settings as the cause of the execution problems.

A quick look at some of Snap’s poor metrics is as follows:

Net Sales: $1.13 billion vs. $1.14 billion expectation

Daily Active Users: 363 million, compared to an expectation of 358 million

Average Revenue Per User: $3.11 vs. $3.17 projection

Compared to what was expected, adjusted EPS came in at $0.08 per share.

Fourth-quarter sales growth is expected to be “flat,” according to the company’s guidance.

The corporation issued a warning that the quarterly sales patterns will become worse in the fourth quarter.

Through the early morning hours, the ‘Trending Ticker’ page on Yahoo Finance featured Snap shares at the top spot.

Mark Mahaney, an analyst at EvercoreISI, stated that the company’s third-quarter results were disappointing. “We had anticipated that the improvement for the month of August that Snap reported at the beginning of September would continue for the entire quarter. In contrast, Snap’s revenue trends were a very volatile 0% year over year in July, mid-teens% growth year over year in August, and low single-digit% growth year over year in September…even with comps easing from the Platform Policy Changes, which began in early Q3:21. Snap’s revenue trends were a very volatile 0% year over year in July, mid-teens% growth year over year in August, and low single-digit% growth year over year in September “he said.

In addition, Mahaney stated, “And we consider it likely that the recent substantial personnel changes at SNAP – the departure of senior ad executives to Netflix – has worsened the headwinds.”

The focus on analysts

The analyst at Jefferies, Brent Thill, has identified three issues with the stock. In spite of Snap’s catastrophic performance during the third quarter, he is maintaining his Buy recommendation on the stock. However, the veteran tech analyst anticipates three challenges in the near future, all of which may not yet be reflected in Snap’s substantially discounted stock price:

“The revised projection for Q4 indicates a considerable slowdown in growth. Despite the fact that Snap’s revenue growth has been accelerating to +9% year over year quarter so far, management is still projecting flat growth year over year for Q4. Weakness in brand advertising appears to be the primary driver of the significant deceleration; however, we think there might also be conservatism encoded in the data. According to our analysis, the first quarter of 2023 might mark the low point for revenue growth, with subsequent quarters showing a steady increase on the back of easier comparisons.

It is hard to determine how many of Snap’s problems are really temporary setbacks. The worsening global background is largely to blame for the lackluster performance, but we question how much of it is attributable to the privacy concerns associated with iOS and the competitive threats. In light of the possible effects that may have on the platform, in the long run, we are more concerned about the competitive risks.

The departure of executives and a decrease in manpower of 20 percent might cause more disruptions. We are concerned that the reorganization Snap is undergoing may cause advertisers to reduce their expenditure or maybe stop it entirely. Given that Snap has been increasing its workforce by more than 30% year over year for four consecutive quarters, we question if the firm would be able to achieve its aspirational growth ambitions with an employee base that is 20% smaller.”

The current value of Snap stock, in numbers

The highest price ever paid is $83.11 (Sept. 24, 2021)

Performance Year-to-Date: -83%

Performance after One Year: -89%

$17 (March 2017 Initial Public Offering Price)

$24.50 was the price after the first day of trading in March 2017.

 

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