TLDR
- Snap stock rose 2.7% to $7.33 on double-average trading volume after hitting 52-week low
- Q3 global user growth slowed to 2.3% from 3.9% in Q2 according to Guggenheim analysis
- North American users declined 1.5% annually with downloads dropping 29.8% in the quarter
- Company completed $550 million debt offering while facing ongoing ad platform challenges
- Analysts project 476 million daily active users for Q3, representing slower growth momentum
Snap stock staged a recovery Tuesday, climbing 2.7% to close at $7.33 after touching a 52-week intraday low of $6.90. The social media company saw heavy trading volume of 102.7 million shares, more than double its three-month average.
The rebound came as broader markets declined. The S&P 500 dropped 0.7% while the Nasdaq fell 0.8% during the session.
However, fresh analyst data suggests the stock’s troubles may be far from over. Guggenheim maintained its Neutral rating, citing concerning user growth trends that could pressure future performance.
User Growth Momentum Fading Fast
Guggenheim’s analysis of Snap’s advertising platform data reveals slowing global audience growth. The company’s Q3 global reach expanded just 2.3% so far, down from 3.9% growth in the second quarter.
Download metrics show an even steeper decline. Global app downloads fell 12.6% in Q3, worsening from the 5.5% drop in Q2.
North American performance looks particularly weak. The domestic audience declined 1.5% annually in Q3, worse than the 1.1% drop in Q2. Downloads in the region plummeted 29.8% compared to 28.5% in the previous quarter.
Guggenheim projects Snap will report 476 million daily active users for Q3. This implies 7 million net user additions and 7.4% growth, down from 8.6% growth in Q2.
Most new users are expected to come from international markets. Rest of World regions should add 6 million users while North American metrics continue declining for the third consecutive quarter.
Financial Moves and Analyst Actions
Snap recently completed a $550 million debt offering through 6.875% senior notes due 2034. The company expects net proceeds of approximately $541.3 million after expenses.
Analyst opinions remain divided following disappointing Q2 earnings. The results showed slower revenue growth and technical problems with the ad platform that hurt campaign performance.
Freedom Broker upgraded the stock from Hold to Buy despite the earnings miss. The firm cut its price target to $9.00, citing advertising performance disruptions.
RBC Capital reduced its target to $10.00 from $12.00 while keeping a Sector Perform rating. The adjustment followed challenges in ad platform execution during Q2.
A pending class-action lawsuit alleges the company misled investors about ad performance capabilities. This legal challenge adds another layer of uncertainty for shareholders.
The heavy trading volume accompanying Tuesday’s bounce suggests heightened investor interest. Some may view the selloff near 52-week lows as a potential buying opportunity.
Technical issues with Snap’s advertising platform continue affecting campaign delivery. These problems contributed to the Q2 disappointment and remain a focus area for management.
Snap’s advertising platform struggles have coincided with increased competition in the social media space. The company faces pressure to improve both user engagement and advertiser satisfaction.
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