Shares of Snap (NYSE: SNAP) slumped 12% this week, according to data from S&P Global Market Intelligence. The social media stock, which was one of the huge winners coming out of the pandemic crash, has come back to earth along with a lot of other high-growth stocks in recent months.
The company reported a 23% increase in daily active users to 293 million, outpacing its peers, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) more than tripled to $117 million. On the bottom line, the company reported adjusted earnings per share of $0.10, up from a loss of $0.09 in the quarter a year ago. It is better than estimates of a loss of $0.01. Overall, the quarter showed strong engagement during the reopening. The company’s executing on its promise from an earlier Investor Day conference to deliver at least 50% revenue growth for the next three years.
Those gains turned out to be short-lived, however, as the stock crashed following its third-quarter earnings report in October. It fell 27% after Q3 numbers came up short and Q4 guidance was particularly weak. Daily-active-user growth jumped by 23% to 306 million, and revenue was up 57% to $1.07 billion, but that was short of expectations at $1.1 billion.
The changes to Apple’s iOS, version 14.5, kicked in last April. It changed the rules of mobile advertising by giving more power to users over privacy controls. The changes made it more difficult for advertisers to deliver personalized ads and measure ad interactions for additional targeting.
Cowen said it surveyed 54 U.S. ad buyers in December to assess digital ad trends as it relates to the Apple iOS changes.
“The respondents said there are noticeable declines in return on investment, as well as challenges regarding attribution and measurement and less ability to re-target consumers,” among other things, Blackledge wrote in a note to clients.
Advertisers found it more difficult to reach their target audience and measure ad impact.
“Other respondents stated that they are still in the early innings of finding effective tactics to mitigate the challenges. With some citing a shift onto other platforms such as Android and Connected TV,” said Blackledge.
Down 12% this week, Snap stock is now down almost 40% in the last three months. This is after shares had surged over 1,000% at some points in the last three years. Many stocks like Snap, with fast-growing revenue but no underlying profits, have hit the brakes the last few weeks. This has been due to some disappointing earnings reports and/or a broad market rotation out of these securities.