The social media advertising industry is in the early phases of a slowdown. SNAP only appears to have better value from here because its share price is relatively lower. When that happens, Snapchat’s earnings prospects will improve. SNAP investors should look for clues that corporations will resume advertising spending. Technology stocks already dropped to reset stock valuations lower. The Federal Reserve plans to increase rates by 50 basis points in June and in July. Although experts are speculating that inflation has peaked, interest rates are still rising. Investors need to look at the inflationary environment monthly. SNAP’s warning forces savvy investors to think deeper.
Markets priced in the weak prospects but they have yet to account for further disappointments. Investors seeking value in SNAP stock should think twice.
SNAP is among the social networking companies whose revenues may fall as a result. Yet if consumers prioritize their spending on essential goods amid higher inflation, companies have lower profits.Ĭompanies may cut their operating costs to sustain positive margins, which often means cutting advertising budgets. Real Macroeconomic PressuresĬompanies have higher input costs that they are passing on to consumers. SNAP has yet to prove that its “Shared Stories” will help reverse the user-base decline. Instagram Reels tried to mimic TikTok, too. Those videos are less than a minute, much like TikTok videos. They can only copy their competitor, hoping that users will stay on their platform instead of defecting. Social networking companies have few strategic options to win back users. He shares his stock picks so readers get actionable insight to achieve strong investment returns. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. The core issues with Snap will not be solved by the use of generative AI.Chris Lau is a contributing author for and numerous other financial sites. Seeking Alpha analyst Julian Lin noted, "SNAP has yet to show real evidence of a turnaround, and I suspect that near term fundamentals may show more pain than upside surprise."įellow analyst Michael Wiggins De Oliveira said, ". Chief executive Evan Spiegel said in June that Snapchat's users had "embraced" its My AI chatbot, a development the company could use to improve targeted ads. Investors will be watching how the digital advertising company deals with a pullback in online ad spending and any chatter on generative AI. Snap shares have recovered since then, up nearly 43% YTD, aided by reports of TikTok bans and Snapchat+ gaining four million paid subscribers in its first year.
In its first-quarter earnings report, Snap's internal forecast for second-quarter revenue missed analyst expectations, sending its shares tumbling. Its earnings per share forecasts have been revised downwards 19 times, while its revenue estimates have been revised down 28 times. Snap has seen substantial downgrades to its earnings in the past three months. Wall Street analysts expect Snap to post earnings per share of -$0.04 on $1.06B in revenues, which would represent a 4.5% drop year-over-year. Investors will be keenly watching Snap as it often serves as a bellwether for digital advertising names. Snap Inc ( NYSE: SNAP), the parent of messaging app Snapchat, is set to report its second-quarter results on Tuesday, kicking off tech earnings.
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