Snap Inc. (NYSE: SNAP) experienced a significant downturn in pre-market trading on Wednesday, with shares plummeting by 31%. This dramatic drop followed the company’s Q4 earnings report, which fell short of revenue expectations and projected a wider-than-anticipated loss for the upcoming quarter.
In Q4, Snap Inc. reported adjusted earnings per share (EPS) of 8 cents, compared to 14 cents in the same period last year and falling below analysts’ expectations of 6.4 cents. Revenue for the quarter reached $1.36 billion, marking a 4.7% increase year-over-year but failing to meet consensus estimates of $1.38 billion.
While the company’s North America revenue showed some resilience, reaching $899.5 million and surpassing projections of $875.9 million, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 32% year-over-year to $159.1 million, although this figure was better than the expected $111.8 million.
Snap reported 414 million daily active users (DAUs) for the quarter, reflecting a 10% increase from the previous year, slightly above the consensus estimate of 411.59 million. However, average revenue per user (ARPU) dropped by 5.2% year-over-year to $3.29, missing expectations of $3.33.
Despite a 41% year-over-year increase in free cash flow to $110.9 million, Snap’s fiscal Q1 outlook fell short of investor expectations. The company forecasts revenue between $1.10 billion and $1.14 billion, compared to a consensus projection of $1.11 billion. Additionally, Snap anticipates an adjusted EBITDA loss ranging from $55 million to $95 million, significantly higher than the estimated $32.7 million loss.
Snap attributed part of its Q4 challenges to external factors, stating, “We estimate that the onset of the conflict in the Middle East was a headwind to year-over-year growth of approximately 2 percentage points in Q4.”
Analysts pointed out that Snap’s announcement of a 10% reduction in workforce the day before releasing its earnings report likely contributed to the negative market reaction. They emphasized a preference for Pinterest (PINS) over Snap, citing clearer valuation and execution improvements, as well as the Amazon partnership as a potential catalyst.
Despite the disappointing performance in Q4, analysts at Stephens reiterated an Overweight rating on Snap, suggesting that the company remains well-positioned to deliver growth in same-store sales and earnings before interest, taxes, depreciation, and amortization (EBITDA).
Snap Inc.’s unexpected loss for Q1 2024 and subdued outlook have sparked concerns among investors, prompting a sharp decline in the company’s stock price.
