Please ensure Javascript is enabled for purposes of website accessibility

My Take: Is This an Overreaction to Snap's Earnings?

By Jose Najarro – Oct 26, 2021 at 10:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Snap's stock price dropped over 25% after its earnings report.

Today's video focuses on Snap's (SNAP 0.35%) recent earnings and what long-term investors should watch in the months ahead. Here are some highlights from the video. 

  1. Snap's earnings were not completely horrible. Daily active users were up 23% year over year (YOY) and saw a quarter-over-quarter (QOQ) increase. Average revenue per user was up 28% YOY and was also up QOQ. At the end of the quarter, Snap reported roughly $3.5 billion in cash, cash equivalents, and short-term investments.
  2. The main reason for Snap's stock price plummeting was that the company's revenue did not meet analysts' expectations, and the upcoming quarter's guidance also fell short of expectations. Snap's management had underestimated the impact of iOS changes on its advertisement solutions, causing the miss in revenue expectations.
  3. Snap may be a very volatile stock until it improves its advertisement problems. This may take months, and investors should be prepared for a bumpy road. In the meantime, investors should make sure that Snap continues to increase its daily active users. Numerous analysts cut their price targets on Snap after earnings, which may also affect its volatility.

Click the video below for my full thoughts and analysis. 

*Stock prices used were the closing prices of Oct. 22, 2021. The video was published on Oct. 24, 2021.

Jose Najarro has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Jose is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.