What happened
Shares of Snap (SNAP 2.00%) finished a volatile month on the positive side, gaining 10% in August, according to data from S&P Global Market Intelligence.
The Snapchat parent gained in the first half of the month on a number of different factors, including news that its Snapchat+ premium product had reached 1 million subscribers. Shares then gave up much of those gains on jitters about rising interest rates before ending the month with a pop on news about layoffs and other cost-cutting measures.
The chart below shows the stock's volatility over August.
So what
Snap shares started gaining on Aug. 10 even though there was no major news out on the stock. A strong earnings report from adtech company The Trade Desk may have helped restore investor confidence in the digital advertising industry, however.
Over the next several days, the stock continued to rise as a survey from Pew Research showed that U.S. teens remain avid users of Snapchat with about 60% of them using the social media app, on par with Instagram and close behind TikTok. Additionally, media reports said employees were expecting layoffs after a recent Q&A call, and the company said that Snapchat+ reached the 1 million subscriber milestone shortly after its launch in June. The premium feature costs $3.99/month and gives subscribers access to custom app icons, profile badges, data insights, and other benefits.
Those gains evaporated over the following two weeks as tech stocks fell broadly after Federal Reserve Chair Jerome Powell said the central bank's interest rate hikes could lead to economic pain.
Finally, on the last day of the month, Snap announced a number of sweeping cost-cutting moves, including laying off 20% of its staff, shuttering stand-alone apps like Zenly, and closing side projects like Snap originals. Two top executives also said they were leaving the company to head up Netflix's new advertising business, and Snap said revenue was up just 8% quarter to date in the third quarter as it continues to face macroeconomic challenges.
Though the update showed the business is struggling in a number of ways, investors generally responded warmly to news of cost cuts, and the stock rose 8.7% on the day.
NYSE: SNAP
Key Data Points
Now what
Snap faces a number of headwinds, including slower revenue growth, competition from TikTok, and the impact of Apple's ad tracking transparency initiative, but the layoffs and cost-cutting moves seem to be the right decision.
The company's top-line growth has generally been strong over its history, but it has spent excessively on new projects and share-based compensation. If it can show investors some consistent profitability, the social media stock could start moving in the right direction, especially once the macro-level headwinds lift.
