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What’s Going On At Snapchat?

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important point

  • Revenue in the third quarter was up 6%, the slowest growth ever for the company.
  • Snap continues to struggle to monetize its user base, epitomized by zero growth in Q3.
  • On the positive side, daily active users around the world continue to grow.

Snap is one of the companies that has benefited from the pandemic. Many flocked to social media as people were forced to stay at home. This has significantly increased the number of daily users on Snap. As a result, the stock prospered. But as life began to return to normal, Snap’s business slowed. Right now, Snap is in a period of transition and hopes to weather a possible downturn without becoming too big a chunk. Here’s what investors should know about Snap’s latest earnings and share price.

snap stocks in the news

Snap’s stock lost almost 30% of its value on Friday, October 21, 2022. The most-cited issues that led to a decline in Snap’s stock price included lower-than-expected third-quarter earnings and a lack of fourth-quarter guidance from Snap’s management. From the statement that it expects growth to be flat in the fourth quarter. Declining advertising revenue in Q3 and lower approval revenue shows that lack of growth in Q4 will hit his Snap hard, with advertisers cutting spending in anticipation of a recession. .

The company reported revenue of $1.13 billion in the third quarter of fiscal 2022, up 6% year-over-year. It also represents the slowest quarterly growth rate ever. Wall Street predicted that the company’s revenue would be $1.12 billion.

Snap beat revenue estimates, but reported a net loss of $359 million as spending and restructuring increased 25%. The most important part of restructuring is 20% laid off of the company’s global workforce.

Another problem is Snap’s inability to monetize its user base into a reliable revenue stream. This is also evident from the fact that his average revenue per user decreased from his $3.49 in Q3 FY2021 to his $3.11 in Q3 FY2022. This represents 11. % loss of revenue per user out of total Snap users worldwide.

Snap has some positives to share in the form of a 19% increase in daily active users (DAU) to 363 million, up from 306 million in the same quarter of 2021. I had news. User growth is happening all over the world, but Snap is growing the most outside of North America and Europe.

Snap shares continued their decline throughout the week, closing at $9.17 yesterday, down 80.32% year-to-date.

Income statement review

Snap posted an operating loss of $359.5 million for the third quarter ended September 30, 2022, an overall loss of $372.9 million, and a total loss of $1.14 billion in the nine months to date. Reported. That’s a sharp increase from his $71.9 million loss in the third quarter of fiscal 2021 and his $510.5 million loss in his first nine months of 2021.

Part of the loss was ($75.7 million) in debt securities and equity, ($12.1 million) in operating lease liabilities, ($37.8 million) in asset and equipment purchases, and ($821.8 million) in marketability. was due to the purchase of securities with

balance sheet review

Snap reported $8.28 billion in unaudited assets at the end of the third quarter of fiscal 2022. Current total debt is $5.38 billion, with a reported cumulative deficit of $9.42 billion.

Its assets include cash and cash equivalents of $1.91 billion, securities of $2.51 billion, accounts receivable of $992.7 million, prepaid expenses of $115.9 million and other current assets. increase.

Snap’s current liabilities include accounts payable of $188.6 million, operating lease liabilities of $57.9 million and account charges and other current liabilities of $893.4 million.

Outlook for Snap stock

Snap relies heavily on advertising revenue. The realm of social media as a profit center for advertisers is in flux. Advertisers rely on active users to buy the products they advertise, and if they determine that they are more likely to acquire an audience on another platform, they will reduce their spending on other platforms. Don’t hesitate. Snap anticipates this by diversifying its efforts to reach users, provide entertainment, and provide an experience that keeps them coming back to the Snap platform more than others.

The company significantly diversified its revenue streams in the third quarter of fiscal 2022. Daily active users increased by 57 million compared to the same quarter in 2021.

Time spent by users on the platform also increased, with a 40% increase in viewing time for the 35+ demographic. The biggest problem is that the user base outside of North America and Europe is growing the fastest, but revenue from North America averages $8.13 per user compared to $0.89 per user outside of North America and Europe. is.

Snap has the platform to surprise investors as a weak global economy strengthens and advertisers start spending money again.

Another area of ​​potential growth is virtual reality. Snap has invested heavily in augmented reality to compete with Meta’s virtual reality platform. In 2021, the company purchased Wave Optics to help with this. However, it remains to be seen whether people are sufficiently interested in virtual reality. Hmm.

If Snap is successful with its diversification efforts, it should weather the stock price decline and recover some of its losses over time. It’s worth noting that all tech stocks have been hit hard by various market forces, and his Snap isn’t the only one to suffer.

However, we cannot ignore that the company has lost 80% of its value in 2022. Its future depends on management’s ability to turn its user base into a reliable source of revenue and restore profitability through various initiatives.

Conclusion

Snap stock has taken a big hit in 2022, and for good reason.While active users grow, the company needs to find the best way to monetize this user base.add the fear of global recession, and much of the advertising revenue Snap once had has dried up. For this reason, investors can put up with this stock. There is no indication or reason for the rapid increase in value. If investors notice advertisers starting to spend again, this could be a signal to slowly build positions in this stock.

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