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Snapchat (SNAP) Layoffs: What This Means for the Stock

Snapchat's (SNAP) shares rose as early Q3 guidance surpasses expectations, boosting those of its competitors (10.86 +0.85).

After reporting early Q3 revenue guidance of roughly +8% yr/yr, Snap (SNAP +8%) moved higher today. 

Today's prediction is a welcome surprise since the social media giant stated last quarter that it would not provide official quarterly guidance owing to economic uncertainty. This is especially true given that as of late July, quarter-to-date sales growth was roughly flat.

SNAP's other announcements were not as optimistic, despite the focus on its preliminary revenue forecast today.

SNAP confirmed yesterday's rumors that it would let go of about 20% of its workforce and that Netflix (NFLX) had appointed two SNAP executives to run its advertising division.

Last quarter, SNAP drastically reduced its employment rate as part of its plan to improve its declining free cash flow. Company restructuring continues.

It is also important to note that sales growth is still significantly slower at 8%. For example, SNAP's revenue increased by +13% in Q2, +18% in Q1, +14% in 4Q21, and +17% in Q3.

Also, Q3 might be another quarter with dropping average revenue per user because inflationary pressures are diminishing consumers' discretionary purchasing power.

Last but not least, a deteriorating macroeconomic environment is having a one-two effect on users' spending on SNAP's platform and business expenditure on advertising.

SNAP is far from out of the woods despite its 8% revenue growth rate being significantly higher than the rate recorded only one month ago, especially in light of the severe competition from Instagram and TikTok (META).

Watch this video to get the technicals and what to expect moving forward.

Good trading!

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