Why SNAP plunge after the significant booming of Meta?
After the release of its Q4 earnings report on Tuesday, $Snap Inc(SNAP)$ plummeted by 33% in after-hours trading.
Pros
Advertising demand seems to be improving, with the company exceeding expectations in user growth, cash flow, and EPS;
DAU slightly below 412 million, growing by 10% to reach 414 million.
Operating cash increased from $1.25 billion to $1.65 billion, and free cash flow increased from $78 million to $111 million compared to last year.
The company reduced its net loss for the quarter from $2.88 billion last year to $2.48 billion.
Cons
Revenue fell short of expectations: Although it grew by 5% year-on-year, saving the decline in the previous two quarters, it still did not meet the expected 6.3% growth rate, resulting in an ARPU of only $3.29, lower than expected;
Restructuring costs: The closure of its AR enterprise business incurred $22.2 million in restructuring costs and $34.3 million in global severance costs.
Guidance fell short of expectations: Q1 revenue guidance will be between $10.95 billion and $11.35 billion (an increase of 11-15%), forecasted at $11.2 billion, and adjusted EBITDA is expected to be between -$55 million and -$95 million.
Why do investors still lack confidence?
1. Revenue fell short of expectations, indicating a gap between monetization capabilities and market expectations, as well as a lack of preference from advertisers.
2. EPS improved due to operational methods such as layoffs, but with unfavorable revenue, EPS growth is not sustainable.
3. Compared to $Meta Platforms, Inc.(META)$ , the contrast is clear. Both rely on advertising, and it can be said that advertisers favor more efficient channels.
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