Snap Shares Plummet on Weak Outlook, Rising Ad Competition

Snap shares dropped 17% in premarket trading due to concerns about losing market share and a bleak forecast from its parent company amid fierce ad competition

The social media company predicted third-quarter results would fall short of market expectations late Thursday. The company attributed this to the need for more demand from advertisers in consumer discretionary sectors.

Rohit Kulkarni, an analyst at Roth MKM, expressed his uncertainty regarding management’s capacity to execute consistently over an extended period.

The digital advertising market is dominated by large platforms such as Meta’s Facebook, Instagram, and Alphabet, further emphasized by Snap’s lackluster targets. The growth of Snap and Pinterest is impeded by the competition between Google and Bytedance’s TikTok.

Snap has persisted in its struggles despite Pinterest’s substantial advertising expenditures in specific sectors, such as technology and retail.
The disappointing part of Q2 demand performance includes noticeable weakness in consumer discretionary sectors like technology, entertainment, and retail. Derek Andersen, Snap’s chief financial officer, stated following the earnings conference call.

If premarket losses persist, Snap, which generates nearly all of its revenue through advertising, is expected to experience a decline in market value exceeding $3.5 billion.

Nevertheless, the stock is notorious for its chaotic fluctuations following earnings reports, having experienced a nearly 28% increase in the previous earnings cycle and a more than 34% decline in the last season.

Meta’s third-quarter sales outlook was optimistic due to the robust global advertising demand, while Alphabet’s advertising sales increased by 11% due to global elections and the Paris Olympics.

Snapchat has consistently been a social platform with potential, which is both thrilling and burdensome. Mark Shmulik, an analyst at Bernstein, stated, “It appears that we are still some distance from realizing that potential.”