Snap shares fall 26% on Wall Street

Snapchat, the parent company of the Snapchat application, largely disappointed the market and said itself "not satisfied" with its quarterly results on Thursday, to the point of substantially slowing the pace of hiring, among other measures to try to regain control.

Snap shares fall 26% on Wall Street

Snapchat, the parent company of the Snapchat application, largely disappointed the market and said itself "not satisfied" with its quarterly results on Thursday, to the point of substantially slowing the pace of hiring, among other measures to try to regain control.

Its title lost more than 26% during electronic trading after the close of trading.

Snapchat had 347 million daily active users at the end of June, 18% more than a year ago, according to a statement, and it continues to attract more people in all regions of the world, including in North America and Europe, where some entertainment platforms are nevertheless facing the beginning of saturation.

The Californian group is also doing well in terms of income, with a turnover of 1.1 billion dollars (13% over one year).

But its net losses widened to $422 million from $152 million last year.

"The steady growth of our community enhances our long-term opportunities, but our second quarter financial results do not reflect the extent of our ambition," the executives said in a note to investors.

“We are not satisfied with our performance, whatever the difficulties linked to the current economic environment,” they added, referring to galloping inflation, in particular.

“Snapchat has a lot of brands among its advertisers, and it’s ads for brands, especially experimental formats around augmented reality, that are the first to go when marketing budgets are cut,” noted Jasmine Enberg, from Insider Intelligence.

The group, which has never generated an annual net profit, had already made a profit warning in May, which had caused its share price to plunge.

"We will be substantially slowing the pace of recruiting...and we will also be taking a close look at our operating expenses," Snap chief financial officer Derek Andersen said on a conference call with analysts.

The company has nearly 6,500 employees, 38% more than a year ago.

Network co-founders Bobby Murphy and Evan Spiegel will stay on as CTOs and CEOs through the end of 2026 for a token $1 a year in compensation, plus stock awards if the price rises above $40 in the next 10 years. It was at $16.35 at the close on Thursday.

The bosses plan to focus on innovation and income diversification.

Paid version

At the end of June, the company launched Snapchat, a paid version of the app, which gives access to additional features for four dollars per month, without removing advertising.

Snap also wants to develop better tools for measuring advertising effectiveness.

Because the application also suffers from Apple's regulatory change, which requires application publishers to obtain the consent of users before tracking them in their navigation to collect data for advertising targeting purposes.

“It's a small player in the digital advertising market. It represents less than 1% of global revenues according to our forecasts for 2022, which makes it more sensitive to constraints than larger players like Meta”, underlined Jasmine Enberg.

Derek Andersen has noticed a “pretty steady” drop in demand over the past year, consistent with Apple’s changes, and competition that has “intensified,” “both from TikTok and other bigger competitors. and more sophisticated" - like Google and Meta (Facebook, Instagram).

So many challenges to which must be added the war in Ukraine and record inflation.

"We're going to need a more cooperative environment," acknowledged the CFO.

“Putting in place a solid foundation for the platform that we can build on and move forward on is very important. But a macro-economic context that allows customers to invest in their marketing budget is also very important,” he said.

The company hopes that its bet around augmented reality will pay off in the long term.

“On average, more than 250 million Snapchat users use augmented reality (our tools) every day,” says the note to investors.

This technology "is still a niche as an advertising or commercial tool, but it speaks to the user base of Snapchat", notes Jasmine Enberg.

According to the analyst, as long as the platform continues to invest in tools and content, it will "attract and retain more available brain time, and ad revenue will follow."

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