Snap stock tumbled Wednesday after the Snapchat parent company declined to provide typical sales guidance for the current quarter, citing macro uncertainty. The social media company's first-quarter results, reported late Tuesday, exceeded expectations.
"We started the year really strong," Snap Chief Financial Officer Derek Andersen told analysts Tuesday night. "Thus far in Q2, we're still growing. But we're seeing some headwinds to our top line growth so far."
Snap said that it lost 8 cents per share on sales of $1.36 billion for the March-ended quarter. Analysts polled by FactSet projected the Santa Monica, Calif.-based company would post a loss of 13 cents per share on sales of $1.35 billion. For the same period a year earlier, Snap reported a loss of 19 cents per share on sales of $2 billion.
On the stock market today, Snap stock fell 12.4% to close at 7.96.
Snap Withholds Guidance
Daily active users of Snapchat increased 9% year-over-year to 460 million. That beat estimates that the messaging platform would reach 459 million daily users.
But investors are likely more focused on Snap's expectations for the current quarter. Analysts expect tariffs enacted by President Donald Trump earlier this month will weigh on advertising, which drives nearly all of Snap's revenue. Snap said it would not provide exact expectations for the current quarter.
"Given the uncertainty with respect to how macro economic conditions may evolve in the months ahead, and how this may impact advertising demand more broadly, we do not intend to share formal financial guidance for Q2," the company said in a letter to investors.
Andersen told analysts that the company has heard from advertisers that spending has been affected by upcoming changes to the U.S. de minimis policy. Trump is closing a U.S. trade exemption that has allowed e-commerce platforms like Temu and Shein to ship packages valued under $800 directly to Americans from China duty-free. China-based e-commerce companies are major ad buyers on social media.
Snap Stock Down 15% This Year
Prior to earnings, Snap stock gained 3% in Tuesday trading. Shares have slipped 15% this year and are down 37% from a year ago. Shares have been hit by fears that tariffs will slow down advertising spending, particularly from Chinese e-commerce firms. Snap also faces uncertainty over whether TikTok will be banned. The ban which could provide a boost in users for Snap. But Trump has delayed enforcement of the 2024 law outlawing TikTok.
Snap's lack of outlook for Q2 reinforced investor concerns, analysts said.
"Going into earnings, revenue guidance, and forward-looking ad market commentary more broadly, was the only thing that mattered," Bernstein analyst Mark Shmulik wrote to clients following the report. "Snapchat didn't offer revenue guidance besides acknowledging revenues were still growing and headwinds had emerged, calling out (how) de minimis affected advertisers. Without the revenue guidance, it makes the stock a difficult one to own as estimates may well be all over the place."
Shmulik reiterated a neutral market perform call on Snap stock.
CFRA analyst Angelo Zino similarly said that the lack of guidance likely "not sitting well" with investors.
"We believe digital ad spend will face headwinds in coming quarters due to tariff uncertainty, with smaller platforms like Snap potentially more vulnerable than larger competitors such as Meta Platforms and Google," Zino wrote.
Facebook parent company Meta Platforms will report first quarter earnings later today.
Coming into the report, meanwhile, Snap stock had an IBD Composite Rating of 57 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
