TLDR
- Snap stock fell 8.2% to $7.71 on Tuesday with trading volume spiking to 260 million shares
- OpenAI unveiled Sora, a new social video app with vertical feed and AI-generated content
- Mizuho issued a Neutral rating with a $9 price target citing weak advertising feedback
- September consumer sentiment came in at 94.2, below the expected 96.0 reading
- Snap reported over $400 million in net losses during the first half of the year
Snap shares took a beating on Tuesday as the social media company faced pressure from multiple directions. The stock closed at $7.71, down 8.21% for the day.
Trading volume exploded to about 260 million shares. That’s roughly 3.4 times the three-month average of 77.46 million shares.
The sell-off came as OpenAI introduced its new social video app based on the Sora 2 image and video generator model. The timing couldn’t have been worse for Snap.
OpenAI’s new platform features a vertical video feed with swipe-to-scroll navigation. Sound familiar? The design closely resembles TikTok, but focuses on AI-generated content instead.
The Sora team explained the app’s features in a blog post. Users can create videos, remix content from other users, and discover new videos in a customizable feed.
One standout feature is called “cameos.” Users can drop themselves into any Sora scene after completing a one-time video and audio recording to verify their identity.
Analyst Concerns Mount
Mizuho weighed in with a Neutral rating and set a $9 price target for Snap. The firm flagged weak feedback from advertising channels as a key concern.
This wasn’t an isolated view. Multiple analysts have issued Neutral ratings on Snap in recent weeks.
The consensus points to ongoing struggles with advertising revenue. Competition in the social advertising space continues to pressure the company’s core business.
Consumer sentiment data didn’t help matters. The Conference Board reported September consumer sentiment at 94.2, down 3.6 points from August.
Economists had expected a reading of 96.0. The miss raised concerns about consumer spending, which directly impacts advertising budgets.
Competitive Pressure Intensifies
Snap was already fighting for market share against TikTok and Instagram. Now OpenAI throws another competitor into the ring.
Social media peers also struggled on Tuesday. Meta Platforms fell 1.21% to $734.38, while Reddit dropped 4.95% to $229.99.
The broader market told a different story. The S&P 500 rose 0.41% to 6,688.46, and the Nasdaq Composite added 0.30% to 22,660.01.
Snap’s underperformance relative to major indexes highlights investor concerns about the company’s competitive position.
Financial Headwinds Continue
The stock has fallen almost 30% year-to-date. Shares trade at 29.7 times 2025 earnings estimates, which might seem reasonable.
But there’s a catch. Those earnings projections use non-GAAP figures that exclude stock-based compensation.
Snap pays substantial amounts in stock-based compensation. When factored in as a real cost, the company remains unprofitable on a GAAP basis.
The company reported over $400 million in net losses during the first half of the year. Revenue growth has slowed to a single-digit pace.
The combination of weak growth, mounting losses, and fresh competition creates a challenging environment. Snap’s gross margin stands at 51.14%, which provides some cushion, but may not be enough given current headwinds.
Snap’s 52-week range spans from $6.90 to $13.28. At current prices, the stock sits near the bottom of that range as investors weigh the company’s path forward in an increasingly crowded market.
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