Evan Spiegel, co-founder and chief executive officer of Snap Inc., said during the virtual Google Pixel Fall Launch event in New York, Tuesday, October 19, 2021.
Michael Ngale | Bloomberg Getty Images
Share from snap tumbled 15% in premarket trading Wednesday, the day after the company released a disappointing quarterly report for the third quarter in a row.
In a letter to investors, Snap called it a “challenging year” marked by “macroeconomic headwinds, platform policy changes, and increased competition. Revenue in the fourth quarter of the company has risen slightly from the previous year.
Like its social media peers Meta and Twitter, Snap has had a rough 2022 as a slowing economy has caused the business to cut its digital ad budget at the same time that Apple’s iOS privacy updates update its targeting capabilities.
UBS analyst Lloyd Walmsley downgraded Snap from buy to neutral, citing increasing competition from other social media companies like MetaTikTok and Youtube. Walmsley reiterated his $10 price target, which represents a 13.5% decline from Tuesday’s close, and lowered his 2023 earnings outlook for Snap.
“Given the magnitude of the competition and Snap’s relatively subscale nature, we see a risk to revenue acceleration,” he wrote in a note Wednesday.
Analysts at JPMorgan said Snap was affected by broader challenges in the industry and macroeconomic environment, but also faced significant company-specific issues. Analysts say the company has continued to reduce engagement with Friends Stories, and while it has made some improvements in advertising, it will hurt advertisers and revenue.
“It’s unclear how quickly Snap’s model will adjust to these changes, and it may take some time for advertisers to realize the benefits and adjust their bids/spends, especially in weaker macros.
environment,” he wrote in a note Tuesday.
JPMorgan analysts maintained an overweight rating on the stock.
Analyst Jeffries said Snap’s fourth quarter was disappointing, and lowered its fiscal year 2023 estimate by 2%.
“We are worried that SNAP’s problem is getting worse, because the new advertising platform is replacing the pressure rev growth and the depth of engagement in friends’ stories is again down y/y,” analysts wrote in a note on Wednesday.
–CNBC’s Jonathan Vanian and Michael Bloom contributed to this report