Snap

Snap Is Down By 38%, Here Is Why

Key Insights

  • Snap says that the economic situation is worse than previously expected. 
  • The company believes that its Q2 adjusted EBITDA will fall into the negative territory. 
  • Snap revenue growth is also expected to slow down. 

Snap Stock Falls After Q2 Warning

Shares of Snap found themselves under strong pressure after the company warned investors that the economic situation deteriorated faster than expected.

As a result, Snap expects that it will report revenue and adjusted EBITDA below the low end of the previous Q2 guidance range. In the first quarter report, Snap  expected to report Q2 revenue growth of 20% – 25% on a year-over-year basis. Adjusted EBITDA was estimated to be between breakeven and $50 million.

The new guidance presented by Snap implies that it will report negative adjusted EBITDA in the second quarter, while its revenue growth would be below 20% on a year-over-year basis.

Not surprisingly, the stock found itself under massive pressure. Shares of other social media companies like Pinterest, Twitter, and Meta are also losing ground at the start of the trading session.

What’s Next For Snap Stock?

Snap stock has lost more than 50% of its market capitalization since the beginning of this year ahead of today’s trading session, and is already down by more than 35% at the start of today’s trading.

Analyst estimates have been moving lower in recent months. Currently, the company is expected to report earnings of $0.34 per share in the current year and earnings of $0.81 per share in the next year, so the stock is trading at 18 forward P/E.

However, these levels do not look cheap as analyst estimates will certainly move even lower after Snap’s warning. The company expects that its growth will slow down while its adjusted EBITDA will fall into the negative territory. Both news are extremely bearish for the stock. In this light, it remains to be seen whether Snap stock will get any support in the near term.

To keep up with the latest earnings updates, visit our earnings calendar.