For the second time in the last year, Snapchat (SNAP) caught optimistic investors off guard. The company posted alarmingly poor second-quarter results. On Friday, July 22, 2022, the stock lost 39%.
Google (GOOGL) fell by 3.47%, Meta Platforms (META) lost 7.59%, and Pinterest (PINS) lost 13.51% in sympathy for Snapchat’s decline.
Snap, once worth over $100 billion at its peak, lost 2 cents a share on a non-GAAP basis. Revenue grew by 13% Y/Y to $1.11 billion. ARPU fell to $3.20, compared to $3.35 last year. The video messaging site is earning less per user. The struggle will worsen in the quarter ahead.
Snapchat cited an uncertain operating environment as a reason to withdraw its revenue and adjusted EBITDA guidance. To prevent a major sell-off, the company’s board authorized a stock buyback of up to $500 million. As the company bleeds cash, a stock buyback is highly unlikely. The company’s founder and CEO could let the stock fall further and take the company private. CEO Evan Spiegel has nearly 50 voting power for the company. Shareholders have none.
Shareholders who thought they had low risks from giving up voting rights may learn a hard lesson. Advertising budgets tightened suddenly in the last quarter. The economic recession is worsening as the interest rate shock hurts consumer demand.
Unless trading the brief rallies, avoid SNAP stock.
