Snap Inc., the company behind the popular social media platform Snapchat, experienced a noticeable decline in its share price on Thursday despite announcing better-than-expected results for the fourth quarter. Following the release of its quarterly earnings after market close on Wednesday, Snap's stock faced intensified selling pressure amid a broader downturn in technology equities, where major indices such as the Nasdaq Composite dropped 1.68% and the S&P 500 declined 1.33%.
The firm reported adjusted earnings per share (EPS) of three cents, outperforming analyst consensus estimates which predicted a loss of three cents per share. Revenue for the quarter reached $1.72 billion, surpassing expectations by approximately 0.84%. This revenue figure also represents a year-over-year growth of 10.21%, rising from $1.557 billion in the corresponding period last year.
While Snap exceeded revenue and earnings projections, its daily active user (DAU) count revealed a subtle contraction, decreasing to 474 million in the fourth quarter from 477 million in the prior quarter. Nonetheless, the platform's global monthly active users (MAU) expanded by 51 million to 946 million, marking a 6% increase year-over-year.
From a technical perspective, Snap's stock exhibits significant signs of downward momentum. The share price is trading roughly 29.1% below its 20-day simple moving average (SMA) and 32.4% beneath its 100-day SMA, indicating prevailing bearish sentiment. Over the trailing twelve months, the equity has depreciated by nearly 50%, positioning the stock much closer to its 52-week low than its high. The relative strength index (RSI) stands at 21.44, which is categorized as oversold, potentially implying latent buying interest if conditions change. However, the moving average convergence divergence (MACD) remains below its signal line, reinforcing negative momentum in the near term.
The convergence of these technical indicators suggests a challenging market environment for Snap, with resistance established near $7.50 and important support near the $5.00 level. Recently, analysts have moderated their outlooks with several firms adjusting their price targets downward: Evercore ISI Group downgraded their target to $9.00 with an inline rating, Wells Fargo set an equal-weight rating with a target of $8.00, and Cantor Fitzgerald lowered their neutral rating target to $7.00, all on February 5.
At the time of the stock’s decline on Thursday, Snap’s shares were trading approximately 8.63% lower at $5.40, reflecting investor concern amid the technology sector’s broader selloff. This decline in price highlights continued headwinds despite Snap's delivery of quarterly financial results that surpassed expectations on top-line and earnings metrics.
Given the mixed signals from user engagement metrics and technical analyses, the company faces an uncertain trajectory moving forward. While revenue growth and increased monthly users suggest some positive momentum in user acquisition and monetization, the decline in daily active users paired with sustained selling pressure in the stock indicates challenges in maintaining investor confidence.
Looking ahead, Snap's stock performance will likely hinge on its ability to reverse user engagement declines and navigate the broader macroeconomic and sector-specific pressures that are currently weighing on technology equities. Investors are urged to monitor the company's upcoming updates and strategic initiatives relating to user growth and monetization to assess potential shifts in market sentiment.