Snap Inc (NYSE:SNAP) shares fell more than 13% at the open on Wednesday after the visual social media company reported yet another round of disappointing quarterly earnings and forecast a decline in revenue in the upcoming quarter.
While the company did not provide formal guidance for the first quarter of 2023, Snap said it had internally forecast a sales decline of between 2% and 10% year-over-year.
“We’ve observed a year-over-year decline in revenue of approximately 7% quarter-to-date,” Snap said in a letter to investors.
READ: Snap price target slashed to $12 by Canaccord after big 3Q revenue miss
But the company noted, given the work it has completed to reprioritize its cash cost structure, it believes it has a path to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) breakeven in 1Q.
For 4Q 2022, the company’s revenue was flat year-over-year and in line with the Street’s expectation of $1.3 billion.
Snap’s net loss increased to $288 million, including restricting charges of $34 million, compared to a net income of $23 million in the fourth quarter of 2021.
It posted adjusted earnings per share of $0.14, down from $0.22 per share in the year-ago quarter but ahead of the consensus expectation of $0.11 per share.
Daily active users came in at 375 million in 4Q, up 17% or 56 million year-over-year, compared to the expected 374.7 million.
For the full-year 2022, the company increased its revenue by 12% year-over-year from $4.1 billion to $4.6 billion.
Its net loss reached $1.4 billion in 2022, compared to a net loss of $488 million in the 2021 fiscal year.
Snap CEO Evan Spiegel commented: "We continue to face significant headwinds as we look to accelerate revenue growth, and we are making progress driving improved return on investment for advertisers and innovating to deepen the engagement of our community.”
Challenges securing advertising in competitive environment
Analysts at Oppenheimer noted that during the fourth quarter, Snap continued to face the same headwinds it had in previous periods, specifically an over-reliance on brand advertising, reduced engagement on Friend Stories, and continued overhang from competitors TikTok, Reelz, and YouTube Shorts.
They noted that Snapchat dominates the 13-to-34-year-old demographic with its unique AR lens, edgy content and emerging games platform with user growth that has rebounded since the 2019 financial year app rebuild, with daily active users up 18% year-over-year in the second quarter of 2022.
“However, monetization is decelerating due to ad targeting and measurement challenges and increased competition for ad budgets,” the analysts wrote.
As such, the analysts maintained their “Perform” rating on the stock with a 12-to-18-month price target of US$9.90.
After falling more than 15% in pre-market trading, shares of Snap Inc (NYSE:SNAP) were down 13.7% at US$9.97 per share shortly after the market opened on Wednesday.
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