Snap (NYSE:SNAP) stock is getting buried on Thursday, closing down by more than 8%. At one point, SNAP stock was even down 10% on the day. This decline marks the stock’s lowest level since late October. While shares have not made new 52-week lows since then, the current trend doesn’t look encouraging.
What’s aiding the decline on Thursday? A downgrade from Jefferies, which cut its SNAP rating to “hold” from “buy” and reduced the price target to $10 from $12. Shares of the company currently trade just below $9. Jefferies analyst James Heaney had the following to say:
“We believe that Snap will continue to face several headwinds, including the iOS14.5 privacy changes, a worsening macro picture, and intense competition.”
Heaney also noted that revenue estimates were too optimistic and cut his expectations to just 2% revenue growth for 2023. Conversely, consensus expectations currently call for about 9% growth next year.
SNAP stock isn’t the only name to catch a negative analysis from Heaney. Per MarketWatch, the analyst also downgraded The Trade Desk (NASDAQ:TTD) today. Shares of TTD stock closed down by more than 8% on Thursday.
What to Do With Snap Stock Now
It has been a tough run for SNAP stock this year. Shares are now down more than 80% year-to-date (YTD).
When Snap last reported earnings in late October, shares fell 28% in a single day. At that low, SNAP was down about 91% from the all-time high. During the quarter, revenue showed slow growth — up 5.6% year-over-year (YOY) — and missed analyst expectations. Non-GAAP EPS of 8 cents showed a surprise profit versus analyst estimates as well.
Still, Snap’s net loss swelled to $360 million versus a net loss of just $72 million in the same quarter a year ago. In other words, all is not well for the company on a GAAP basis.
There is some optimism here as lawmakers consider a ban of TikTok in the United States. However, company-specific concerns are outweighing that potential positive, at least in the short term.
It doesn’t help that we’re in a “risk-off” environment and growth stocks and social media stocks have been crushed. It also doesn’t help that the Federal Reserve was more hawkish than expected on Wednesday.
That could be setting the stage for a difficult couple of quarters for growth and tech stocks as well as create worries for the economy. As the economy — both domestic and global — slows down, marketing budgets may dry up. As ad spend drops, revenue and earnings fall for companies like Snap.
So, although SNAP stock has already fallen more than 80% YTD, there’s reason for more concern in the short term.
On the date of publication, Bret Kenwell did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
