Snap stock (NYSE: SNAP) slipped to a a drop of almost 15 percent hours after a fourth-quarter earnings package that pointed to continued sluggishness weighing on earnings in early 2023.
Truist rated the quarterly report as mixed, noting that income flatness was offset by a “comfortable” outpacing of earnings before interest, taxes, depreciation and amortization. But not quite guidance indicating a 2-10% drop in revenue in the first quarter — which would be the company’s first year-over-year decline — was “well below Street expectations.”
On Snap’s earnings call, brief comments from co-founder/CEO Evan Spiegel quickly gave way to a question-and-answer session.
Last year “was a challenging year for our business as we continue to be impacted by macroeconomic headwinds, platform policy changes and increased competition,” Spiegel said.
He also pointed to investments to improve the ad platform in three areas: “Investing in viewability and measurement; improving engagement and conversion quality; and increasing the volume of high-quality engagements and conversions.”
But it will take time for those improvements to translate into top-line growth, he said.
He also said the path to sustainable profitability continues to improve after a third straight year of positive adjusted EBITDA, as well as a second straight year of positive free cash flow.
Delving into the disappointing first-quarter commentary, Spiegel said on a call with partners that “advertising demand hasn’t really improved, but it hasn’t gotten significantly worse either.”
“I mean, obviously brand spending was down significantly, but as we saw in the quarter, our direct response business continued to grow in the fourth quarter,” Spiegel said. “And in general, our partners seem to be just very cautiously managing their spending so that they can respond quickly to any changes in the environment.”
The next key catalyst for Snap stock is an investor day scheduled for February 16.
The Snap report blasted colleagues on social media, with Meta (META) -1.5%Pinterest (PINS) -2.2%Match Group (MTCH) -9.8%Bumble (BMBL) -2.3%(GOOG) -0.8%(GOOG) -0.9% with Snap’s earnings seen as a reading for the advertising market.