Snap, the parent company of the popular messaging application Snapchat, collapsed by nearly 40% on Wall Street on Friday the day after the announcement of results and advertising revenue deemed disappointing.
The California-based company, which widened its losses to $422 million in the second quarter and announced a slowdown in hiring on Thursday, saw its stock plummet 39.1% to $9.95 on Friday at the close of trading. the American Stock Exchange, far from its level of introduction on the market in 2017 at 17 dollars.
The application, which nevertheless has 347 million daily users – 18% more than a year ago – was sanctioned by investors, frightened by the comments of its management which intends to radically tighten its belt in a context of reduced advertising spending.
“We will substantially slow down the pace of recruitment […] and we will also take a close look at our operational expenses, “said Derek Andersen, Snap’s chief financial officer, the day before, while the two founders of the network, Bobby Murphy and Evan Spiegel, will now be paid 1 symbolic dollar annually until 2026.
Popular first among the youngest, Snapchat is suffering from a reduction in brand advertising expenditure, but also from Apple’s regulatory change, which requires obtaining the consent of users before tracking them in their navigation for the purpose of ad targeting.
“Snap delivered another disastrous quarter to us,” summed up Dan Ives of Wedbush Securities. That said, he added, Snap is like “a paper plane in a storm that doesn’t represent a phenomenal barometer of the rate of slowdown in advertising for platforms like Facebook or Google.”
Snap, which has yet to generate an annual net profit, remains a small player in the global digital advertising market. The application “represents less than 1% of global revenue […]which makes it more sensitive to constraints than larger players like Meta,” noted Jasmine Enberg of Insider Intelligence.
The company has nearly 6,500 employees, 38% more than a year ago.
The impact of the Musk affair
For its part, Twitter recorded results in the second quarter that were significantly below expectations and fell back into the red, a disappointment due, according to the social network, to an unfavorable context, due in particular to the uncertainty linked to its potential takeover by Elon Musk.
The group, which is trying to get the entrepreneur to keep its commitment in court, saw its turnover decline over one year (-1%), to 1.18 billion dollars, and recorded a net loss of 270 million, according to a statement released Friday. Reported per share, the loss is almost triple what analysts expected.
This decline is attributed to “headwinds” in the advertising sector, to fears weighing on the economic situation, but also to “uncertainty linked to the ongoing acquisition of Twitter” by Elon Musk. “Twitter is in a boat in the middle of a storm,” commented Jasmine Enberg of Insider Intelligence, who recalled that the group was “used to poor performance”.
In an environment of tightening credit conditions and an economic slowdown, companies whose model is entirely based on advertising are suffering from shrinking advertiser budgets.
Analysts nevertheless welcomed the increase of 8.8 million in the number of so-called “monetizable” daily active users of Twitter, that is to say who can be exposed to advertising on the platform, for a total of 237 ,8000000. “It’s better than we feared, and the numbers remain relatively solid considering the current environment,” reacted, in a note, Dan Ives, of Wedbush Securities. “Compared to Snap’s nightmare, we see that the ad hasn’t collapsed,” the analyst added.
After the publication of quarterly results, the title thus limited its decline to less than 2% in electronic trading prior to the opening of Wall Street, to recover and end the session up 1.1%, at 39.94 dollars.
Beyond an unfavorable economic situation for the entire sector, Twitter is also weakened by the saga of its hypothetical takeover by Elon Musk. After the renunciation of the contractor, at the beginning of July, the file moved on the legal ground, where the leaders intend to obtain that the billionaire is forced to acquire Twitter.
However, the social network “is now in the unenviable position of having to convince advertisers that its advertising business is solid, regardless of the outcome of its legal battle with Musk”, explained Jasmine Enberg.