What Happened?
Shares of social network Snapchat (NYSE: SNAP) fell 17.7% in the afternoon session after the company reported disappointing second-quarter financial results, driven by a revenue miss and a critical error on its advertising platform. The social media firm posted revenue of $1.34 billion, which fell short of analysts' $1.35 billion forecast. A key metric, average revenue per user (ARPU), which measures how much money the company made from each user, also disappointed at $2.87, below the expected $2.90. Chief Executive Evan Spiegel explained that a flawed update to its advertising platform caused ad campaigns to be priced substantially lower than intended. Adding to investor concerns, the company's net loss widened from the prior year, and it announced the departure of its senior vice president of engineering. While daily active users grew, the positive user numbers were overshadowed by the company's struggles to effectively monetize its platform.
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What Is The Market Telling Us
Snap’s shares are very volatile and have had 25 moves greater than 5% over the last year. But moves this big are rare even for Snap and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 3.5% on the news that markets rebounded following a sharp sell-off in the previous trading session as a weaker-than-expected U.S. jobs report fueled speculation that the Federal Reserve will cut interest rates in September. The July Nonfarm Payrolls (NFP) report revealed a significant slowdown in the labor market, with the economy adding only 73,000 jobs, well below the anticipated 110,000. Furthermore, data for May and June was revised downwards, indicating 250,000 fewer jobs were created than initially reported. This weaker economic data has led investors to increase their bets on a potential interest rate cut by the Federal Reserve. According to the CME FedWatch Tool, the probability of a rate cut in September has surged to over 80%. Lower interest rates are generally seen as a positive for growth-oriented stocks, as they can boost economic activity and increase the present value of future earnings, fueling broad-based rallies in sectors like technology.
Snap is down 31.7% since the beginning of the year, and at $7.68 per share, it is trading 40.3% below its 52-week high of $12.86 from December 2024. Investors who bought $1,000 worth of Snap’s shares 5 years ago would now be looking at an investment worth $359.60.
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