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shares of snap It closed down more than 34% on Wednesday, a day after the social media company missed revenue estimates and issued light guidance in its fiscal fourth-quarter earnings report.
The company is struggling with a slow recovery from a tough 2022 advertising market compared to other companies meta,
It was Snap’s third-worst day on the market since its debut in 2017. Its two biggest one-day declines were a 43% decline in May 2022 and a 39% decline two months later.
Snap reported revenue of $1.36 billion for the quarter, slightly less than the $1.38 billion expected by analysts, according to LSEG, formerly known as Refinitiv. The company reported adjusted EPS of 8 cents, compared with analysts’ expectations of 6 cents.
The results mark the company’s sixth consecutive quarter of single-digit growth or decline in sales. Snap estimates its growth will accelerate in the first quarter but not as fast as analysts expected.
Analysts at Morgan Stanley maintained an underweight rating on Snap and lowered their price target to $11 in a note to investors on Wednesday, writing that the company’s advertising turnaround was slower than expected and its participation was weak. He noted strong ad improvements and impression growth in meta and Amazon This could represent another headwind for Snap’s advertising revenue.
“Although we are encouraged by the progress we are making with our advertising platforms and the improved results we are driving for many of our advertising partners, we estimate that the onset of the conflict in the Middle East was a headwind year-to-date. That’s an increase of about 2 percentage points over Q4, Snap said in a letter to investors.
Barclays analysts remained optimistic after the earnings, placing an Overweight rating and a $15 price target on the stock, writing that “buying on the dip looks worrying but is probably the right thing to do here.”
“Looking back, 4Q was a mixed bag, but the uptick in 1Q gives us confidence that things are back on track,” the analysts wrote. “SNAP feels like the meta from about 5 quarters ago, on the cusp of some very good recovery trends but with few believers in the thesis.”
Analysts at JPMorgan reiterated their down rating on Snap shares, while raising their price target to $11 from $9, based on 2025 revenue expectations of about $5.9 billion, and writing that “engagement and “Strong growth” is required in the advertising platform. ” reflected in the company’s fourth quarter earnings and first quarter outlook.
“In the meantime, the extreme volatility in Snap shares will keep many away, and the company will need to continue to show it can bring better execution,” he wrote.
In an interview on CNBC’s “Money Movers” on Wednesday, CEO Evan Spiegel said Snap is “already seeing improvement” in advertiser performance, which the company hopes will drive revenue growth.
“I think advertisers are looking for an alternative to these huge big tech ad companies,” Spiegel said. “They want to diversify their ad spend, but they need to see performance and that’s why we’re investing so heavily in our direct response.”
Responding to a question about Snap’s decision earlier this week to eliminate about 10% of its global workforce, or about 500 employees, Spiegel said the cuts would allow the company to “move forward faster.” Execution will be strengthened by removing management layers.
— CNBC’s Michael Bloom and Jonathan Vanian contributed to this report.
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