Snapchat (SNAP) - ★★★★★
Ranked #1 in our Q3 2024 SMID Cap Equity Rankings
Snap Inc., the parent company of popular social media platform Snapchat, saw its stock plummet 25% during intraday trading following the release of its second-quarter earnings report. This marks the third instance in the past year where the stock has experienced a significant decline of 20% or more, highlighting its notorious volatility.
The latest drop comes as Snap reported revenue slightly below analyst expectations and provided a cautious outlook for the third quarter. Despite the company's revenue growing 16% year-over-year to $1.24 billion, it fell short of the anticipated $1.25 billion. Snap also posted an operating loss of $253 million, though it managed to meet expectations with adjusted earnings of two cents per share.
Looking ahead, Snap's third-quarter revenue guidance of $1.335 billion to $1.375 billion, representing a 12% to 16% year-over-year increase, disappointed investors as it came in below the average analyst forecast of $1.364 billion.
However, it's not all doom and gloom for the social media giant. Snapchat's user base continues to grow, with daily active users increasing 9% to 432 million, slightly surpassing expectations. Moreover, the platform reported over 850 million monthly active users, exceeding analyst estimates of 843 million.
While the stock's current decline may seem alarming, seasoned Snap investors have seen this pattern before. In the past year, similar steep drops have been followed by impressive rebounds, with the stock gaining 70% and 100% within one to three months after previous selloffs.
source: TradingView
This pattern of sharp declines followed by rapid recoveries has made Snap stock an attractive vehicle for traders who specialize in options or rely on technical indicators. The stock's volatility presents opportunities for substantial gains, albeit with significant risk.
As Snap navigates challenges in the digital advertising market and works to improve its financial performance, investors will be watching closely to see if the stock can stage another remarkable comeback. For now, the company's growing user base provides a silver lining amidst the current stock market turbulence.
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