Snap Is the Picture of Recessionary Tech how

Snap opted not to give specific guidance for revenue and adjusted earnings before interest, taxes, depreciation and amortization for the third quarter. It did say that, thus far in the period, revenue is roughly flat year on year, adding that visibility remains “incredibly challenging.” Its shares, which had shed three-quarters of their value over the last year heading into Thursday’s earnings report, plunged another 26% in after-hours trading.

To put Snap’s third quarter color into perspective, since its first full year as a public company in 2018 its year-over-year growth has averaged 50% across all quarterly reports. Its second-quarter growth was its weakest since the second quarter of 2020 at the onset of the pandemic. ts 43% single-day selloff in late May first made Snap a poster child for 2022’s tech bear market. Coming into Thursday’s print, Snap’s shrunken valuation already had some analysts calling a bottom. As of Thursday morning, Snap fetched just over four times enterprise value to forward sales—well below its average of 12 times over the last five years, and even below the nearly 10 times it fetched in mid-2019. Snap’s shareholder letter seemed aimed at investors focused on the present rather than stories about what might be. It outlined a plan toward free cash flow breaking even or better that can be executed even off reduced growth rates. Snap also said Thursday it was authorizing an up to a $500 million share repurchase program to offset the impact of recent share dilution.

But it also continued to tout its potential, noting its recent financial results, “do not reflect the scale of our ambition.” Snap does have a lot going for it. If tomorrow’s social media favors young users, images over words, and augmented reality, Snap is no doubt well-positioned. And, unlike fellow social media platforms like Meta Platforms ’ Facebook and Pinterest, Snap continues to score more users: Daily active users beat both its own and Wall Street’s forecasts for the second quarter. Against a widespread changing of the guard in tech, cycling out founders at the top ofAmazon, Twitter and Pinterest, Snap is bucking the trend, announcing Thursday its co-founder Evan Spiegel would remain as chief executive at least until the beginning of 2027. That is at once reassuring and concerning. Execution risk with the current management team is real: There was the abysmal Android remodel, which temporarily caused users to drop; and more recently, Snap failed to predict the dramatic effect Apple’s targeting changes would have on its customers’ targeting abilities.

Snap also has shown a keen sense of what today’s social media users want. It was first to add Stories to its platform, for example—a format then copied by virtually all of its competitors. Still, unlike TikTok and Instagram, it has yet to show it can keep its users’ attention long enough to attract a lion’s share of ad dollars. Similarweb U.S. Android data show Snapchat users are spending less than half as much time on its app as on ByteDance’s TikTok and Meta’s Instagram, respectively