A bruising year for Snap Inc.’s shares worsened Thursday, as the stock plummeted more than 20% in after-hours trading as executives launched the company’s first major share-repurchase program amid revenue issues in a poor environment for online advertising.
Snap
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executives revealed that revenue increased less than 6% year-over-year in the quarter, and said that the holiday season is shaping up similarly, with sales increasing 9% so far in the quarter. The social-media company, which laid off roughly 20% of its staff this summer in response to the issues, also declined to provide a full forecast for the important fourth quarter.
“Forward-looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” executives explained about the lack of guidance in a letter to investors.
The board did approve a $500 million share repurchase, a first for the young company. In a news release, executives said that the move was meant “to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture.”
Snap’s results — the first among the major tech companies who rely heavily on digital advertising — likely portend even more turbulent times ahead for Alphabet Inc.’s
GOOGL,
GOOG,
Google, Facebook parent company Meta Platforms Inc.
META,
Twitter Inc.
TWTR,
Pinterest Inc.
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and others in the grip of inflation, a war in Ukraine, foreign-exchange worries and a widening recession.
Deteriorating macroeconomic conditions have left advertisers with little choice but to delay or cancel buys. At the same time, intensifying competition from the likes of TikTok and others has deepened headwinds.
Snap reported a third-quarter net loss of $359.5 million, or 22 cents a share, compared with a loss of 5 cents a share a year ago. Analysts on average were expecting a loss of 24 cents a share.
Snap’s sales increased less than 6% to $1.13 billion, barely falling short of Street estimates of $1.14 billion. Daily active users rose 19% to 363 million. FactSet analysts had modeled 358.2 million.
Snap shares initially fell more than 20% in after-hours trading. They closed the regular trading session down 0.6% to $10.79. Shares of Snap have nosedived 77% this year, while the S&P 500 index
SPX,
is down 23%.
