Snap Plunges 22% After-Hours on Disappointing Q3 Results

Shares of the American social media company Snap, Inc. (SNAP) plunged 22% in the extended trading session on October 21 after the company posted weaker-than-expected revenue and Q4 guidance. Snap’s quarterly performance was impacted by changes to the iOS platform, which hampered its ability to target and measure digital advertising, as well as ongoing global supply chain and labor challenges.

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The company reported revenue of $1.07 billion, up 57% year-over-year but missed the consensus estimate of $1.1 billion.

On a positive note, earnings stood at $0.17 per share, beating analyst estimates of $0.08 per share. In the year-ago period, Snap posted earnings of $0.01 per share. Further, Snap’s daily active users (DAU) grew 23% year-over-year to 306 million.

Commenting on the results, Evan Spiegel, CEO of Snap, said, “We’re now operating at the scale necessary to navigate significant headwinds, including changes to the iOS platform that impact the way advertising is targeted, measured, and optimized, as well as global supply chain issues and labor shortages impacting our partners.”

Spiegel concluded, “We will continue to focus on delivering strong results for our advertising partners and innovating to expand the capabilities of our platform and better serve our community.” (See Insiders’ Hot Stocks on TipRanks)

Based on the current economic environment and business momentum, Snap guided for fourth-quarter revenue to fall in the range of $1.165 – $1.205 billion, lower than the consensus estimate of $1.36 billion. Q4 adjusted EBITDA is expected to be between $135 – $175 million.

Recently, Wells Fargo analyst Brian Fitzgerald maintained a Buy rating on the stock with a price target of $95, implying 26.5% upside potential to current levels.

In the Q321 Preview report, Fitzgerald was optimistic about the results, citing third-party data from Apptopia, which inferred global accelerating DAU growth, especially in the U.S.

The analyst said, “Although the monetization backdrop appears somewhat mixed (solid, but not sensational, social media spend data points, crosswinds from iOS ATT, select advertiser category pullbacks on supply chain constraints), we believe SNAP is well-positioned as a share gainer and should post solid revenue results.”

Overall, the stock commands a Strong Buy consensus rating based on 28 Buys, 6 Holds, and 1 Sell. The average Snap price target of $87.67 implies 16.7% upside potential to current levels. Shares have gained 92.7% over the past year.