Snap (SNAP 27.63%) stock is getting crushed this week. As of 10:15 a.m. ET Friday, the social media company's share price was down 34.3% from where it traded at the end of last week, according to data from S&P Global Market Intelligence.
Snap published its fourth-quarter results on Tuesday, and both its performance and guidance fell short of expectations in key areas. While the company reported non-GAAP (adjusted) earnings of $0.08 per share -- beating the average analyst's estimate of $0.02 per share -- its $1.36 billion in sales missed Wall Street's consensus target of $1.38 billion.
Monetization disappoints despite solid user growth
Snap recorded 414 million daily active users (DAUs) in Q4, up roughly 10% year over year and 2% sequentially. That user growth was actually better than anticipated, but its sales conversion rates were less encouraging. The $3.20 per in average revenue per user (ARPU) that the business posted came in significantly below the $3.47 in ARPU that it posted in the prior-year period.
Snap's revenue still grew by 5% year over year, but ARPU softness meant that revenue performance fell short of expectations even with stronger-than-anticipated user growth.
What comes next for Snap stock?
Management's guidance also came in as somewhat of a mixed bag. Snap expects to have roughly 420 million daily active users in Q1 2024, and revenue is projected to grow between 11% and 15%. While the company's guidance for revenue to be between $1.095 billion and $1.135 billion was roughly in line with the average analyst target, Wall Street is concerned about the sales makeup. The company's DAU count will likely be higher than previously anticipated, but its ARPU is projected to fall short again.
SNAP PE Ratio (Forward) data by YCharts.
Even after this week's big pullback, Snap is still valued at roughly 63 times this year's expected earnings. While the stock could bounce back above current pricing levels, the sell-off reflects investors' concerns about the company's ability to scale profitably.
