- After reporting its first-quarter earnings and stating that it wouldn’t be providing second-quarter guidance, Snap’s stock dropped by 14%.
- Trade limitations and modifications to the de minimis exemption are adversely affecting Snap.
- The firm is grappling with fluctuating profits and diminishing user expansion in crucial regions.
Snap 's stock has taken a series of beatings. Now, it's another victim of President Donald Trump's wave of trade restrictions.
On Tuesday, Snap dropped 14% following the aftermarket session as a result of the social media company The company announced its first-quarter earnings. Both revenue and user growth, which is a crucial indicator for media businesses, matched market projections fairly closely. However, during the discussion, the CFO, Derek Andersen, said something that unsettled investors.
Andersen stated during the earnings call that due to the unpredictability of how macroeconomic conditions might change in the coming months and the potential effect on overall advertising demand, they do not plan to provide official financial guidance for Q2.
Tech companies like Amazon, Meta, and Snap Many of their clients come from Chinese businesses aiming to attract American customers. However, tariffs and various trade limitations cause products to become costly, making them less attractive for Chinese firms to promote on US-based platforms.
The CFO also said there will be "headwinds" from changes to de minimis, a loophole that lets goods valued at less than $800 enter the US duty-free. As of May 2, de minimis shipments of China-made goods will no longer be allowed.
"Andersen mentioned that they have received feedback from some advertisers who say their expenditures were affected by modifications to the de minimis exemption rules," he stated.
Following the earnings release, RBC Capital Markets analyst Brad Erickson described the outcomes as "difficult" and pointed out that the firm will not be issuing revenue forecasts.
On Tuesday, CFRA analyst Angelo Zino noted that although Snap's expenditures in augmented reality and artificial intelligence contributed positively to their outcomes, the lack of second-quarter guidance seems to be causing unease among investors, which probably resulted in the decline of the company’s stock value that day.
Zino also mentioned that smaller platforms such as Snap are "at greater risk of being affected" by tariffs compared to bigger rivals like Meta and Google.
The owner of Snapchat has had its share of problems Long before Trump imposed his tariffs, this company has faced strong competition from Meta’s offerings and TikTok. Its financial reports have shown mixed performance, occasionally failing to meet Wall Street expectations regarding income. In recent years, investors have grown concerned about the slowdown in user expansion within key regions such as North America and Europe, along with substantial expenditures on machine learning initiatives and promotional advertisements.
Its stock is down close to 40% over the last year and it has lost 66% of its value since its 2017 initial public offering. Then valued between $20 billion and $25 billion, it was, at the time, the biggest IPO on a US exchange since Alibaba debuted in 2014 at a value of $168 billion.
Snap announced a first-quarter revenue of $1.36 billion, marking a 28% rise from the previous year. The company recorded a net loss of $140 million, an improvement over the $305 million deficit seen in the same period last year. Snap achieved 460 million daily active users, which represents a 9% growth since this time last year.
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