Shares of Snap tumbled more than 13% on Wednesday, a day after the company released a disappointing quarterly report for the third quarter in a row.
In a letter to investors, Snap called it a “challenging year” that was marked by “macroeconomic headwinds, platform policy changes, and increased competition.” Revenue in the company’s fourth quarter was up slightly from a year earlier.
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Like social media peers Meta and Twitter, Snap had a rough 2022 as a slowing economy led businesses to slash their digital ad budgets at the same time that Apple’s iOS privacy update limited targeting capabilities.
UBS analyst Lloyd Walmsley downgraded Snap from buy to neutral, citing increased competition from other social media companies such as Meta, TikTok and YouTube. Walmsley reiterated a price target of $10, which implies downside of 13.5% from Tuesday’s close, and trimmed his 2023 revenue outlook on Snap.
“Given the magnitude of competition and Snap’s relatively subscale nature, we see risk to revenue acceleration,” he wrote in a note Wednesday.
Analysts at JPMorgan said that while Snap is being affected by broader challenges in the industry and the macroeconomic environment, it is also facing significant company-specific problems. The analysts said the company is seeing a continued decline in engagement with Friend Stories, and while it’s making some improvements in advertising, they will be disruptive to advertisers and revenue.
“It’s unclear how quickly Snap’s models will adjust to these changes, & it may take advertisers some time to recognize the benefits & adjust their bids/spending accordingly, especially in a weaker macro
environment,” they wrote in a note Tuesday.
The JPMorgan analysts maintained their underweight rating on the stock.
Jeffries analysts said Snap’s fourth quarter was disappointing, and they lowered their fiscal year 2023 estimate by 2%.
“We are concerned that SNAP’s issues are intensifying, as recent ad platform changes further pressure rev growth and depth of engagement on friend stories again decreasing y/y,” the analysts wrote in a note Wednesday.
— CNBC’s Jonathan Vanian and Michael Bloom contributed to this report.