'Snap Drops a Bomb': Snap (SNAP) Stock Crashes Nearly 30% on Forecast Cut, Musk-Twitter Saga to Get a 'Whole Lot More Interesting' Says Analyst

May 24, 2022 5:18 AM EDT
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Price: $14.64 -0.41%

Rating Summary:
    38 Buy, 16 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 12 | Down: 18 | New: 23
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Shares of Snap (NYSE: SNAP) are down almost 30% in pre-market Tuesday after the social media company warned that the deteriorating macroeconomic environment will weigh on its Q2 results.

"The macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range," the company said in a U.S. securities filing.

In April, Snap said it is looking to grow its revenues by 20-25% in Q2 on a YoY basis.

The company will also slow hiring for this year, according to Reuters.

"Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more," CEO Evan Spiegel wrote in a note.

Snap dropped a bomb, commented Vital Knowledge analyst Adam Crisafulli.

“Just when tech was trying to find a floor and people were excited about M&A in the sector, SNAP comes out w/a pretty surprising profit warning. We say surprising for two reasons: 1) it’s only been about 1 month since they reported and guided and 2) back on 4/21 mgmt. implied the outlook was conservative, suggesting they could even be upside (that’s obviously not the case). This SNAP update will make the Twitter saga a whole lot more interesting and will obviously weigh on SNAP’s main peers,” Crisafulli said in a client note.

Wolfe Research analyst Deepak Mathivanan cut the price target to $22.00 per share, down from the prior $31.00.

“We believe SNAP's advertiser mix, category exposure, and sub-scale nature in ad budgets are also causing incremental volatility in a weakening macro-environment. As we look ahead, we expect visibility to remain low over the next few quarters. Shares are trading at 3.8x our revised FY23 revenues after a 30% draw down in after-market trading, which is near the COVID bottom (3.5x FY2 Revs) on March 2020. Given the lingering uncertainty on top-line trajectory and SNAP's low profitability, we expect shares to remain volatile over the next few months until estimates stabilize,” the analyst said.

By Senad Karaahmetovic

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